An automated forex trading system is a system that relies on pre-set rules and principles to identify trading opportunities and execute those opportunities without a manual interaction with the trader.
Automated trading systems have over the years gained popularity to become the preferred trading tools of retail traders and are no longer treated as luxury products for institutional investors.
Factors To Consider When Setting Up An Automated Trading System
There are several factors to consider when choosing your automated forex trading system. Some of them can be optional depending on your level of trading knowledge and expertise.
Choose The Trading System That Suits Your Needs
The first thing you should do is ensure that the automated trading software suits your needs. Some trading systems are fast and complicated, while others are simple and easy to use.
Others may prefer a program that generates trading reports, automatically executes stop loss limits, applies trailing stops, and takes profit orders. Others can also choose a system that specializes in a particular class of assets like commodities (gold, oil, silver, etc.), or a specific currency.
Guaranteed Returns And Fees
Automated trading system providers can charge a one-time fee or use a subscription model. It is up to you the trader to decide the perfect payment model for you. Also, ensure there are no other hidden fees and commissions taken by the system as you trade.
Although it is difficult to give a specified rate of return that traders can expect to receive, some automated trading systems offer a guaranteed minimum. It is up to you to decide whether the minimum return on investment offered is enough based on the price of the system and your profit targets.
However, you should also check reviews and ratings of the system if available to determine whether the system has consistently been able to deliver the advertised rate of return.
Designing A Detailed Trading Plan
Every successful forex trader needs to have a well-thought-out trading plan, from trading times to risk management and capital allocation.
Therefore, your automated trading system also needs to adhere to your plans including the level of leverage you are willing to use for the system and trading size (a standard lot, mini lot, micro lot, etc.).
Taking Your System For A Test Run
For a plug-and-play system, you can run it using a small investment. Although some claim to offer testing funding with virtual currencies, it is important to run the test with real money.
If you go for the more complex system, you must decide how to implement it. As part of this step, you will decide how your system will recognize an opportunity and what action will be taken afterward. You can, for example, instruct your system to place a transaction or notify you of one. You can then adjust the parameters to align with your targeted outcomes.
If you wish to simplify the design, consider your usual tools for identifying trends, including moving averages and returns on investment, as well as the usual way you make purchases. Furthermore, your automated forex trading system must be based on your knowledge of trading, financial markets, and technical analysis. Therefore, you will need to understand a great deal about this field of trading.
Benefits Of Automated Forex Trading Systems
Automated trading can be advantageous to all types of traders, regardless of your experience level. Even the biggest institutional investors use automated trading systems for day trading. Here are the key benefits of automated trading systems.
Takes Emotion And Fear Out Of The Equation
This is one of the biggest challenges that traders face— closing traders too early when they can still make more profits, or cutting losses early when the trade is still in a position to recover. You can also look at things the other way around, keeping a position open for too long.
An automated system eliminates this weakness by following the pre-set rules and principles, including utilizing tools and features like trailing stops.
You Don’t Need To Be Around Your App Or Computer To Trade
An automated system can work on its own, especially if it is a plug-and-play system. All you need to do is set it on in the morning or at the beginning of the week and then off at the end of the day or the end of the week. This gives you time to attend to other business as the system makes you money.
You Never Miss An Opportunity
When you are trading manually, sometimes you may not be in a position to act on trading signals generated by the system. However, if you automate the system, it will be able to pick trades and execute them as the signals are generated.
Watch Out For Automated Forex Trading Scams
The forex market oversees more than $6.5 trillion worth of daily transactions. That makes it one of the biggest targets of scammers online. Some systems could lure you into a trap by claiming to guarantee high returns, which is often a red flag.
Others use actors to run their false advertising campaigns, often showcasing their fake successful lifestyles. In most cases, you cannot trace the whereabouts of the owners of such services, most of them operating anonymously.
Overall, always do your due diligence thoroughly, including checking the registration status of the company providing the service. You can also stay informed by regularly visiting the websites of your local financial and capital markets regulator for alerts of possible scams.
In summary, automated forex trading allows all types of traders to make money in forex regardless of their expertise and knowledge. However, it is important to ensure that the system you choose suits your investment plan.
Also, be sure to stay vigilant because there are scammers out there ready to swindle you for your naivety.
If you are looking to start investing in forex, informative platforms like Telegram.Forex, which also offers a variety of tools and services to beginners can be your first stop.