Automated forex trading systems, sometimes called mechanical trading systems, allow traders to specify trade entry and exit rules. You can then use a computer to automatically execute these rules once they have been programmed.
The US stock exchange relies heavily on automatic trading systems for more than 70% of its trading. Traders also refer to this strategy as algorithmic trading. An automated trading system helps the computer execute and monitor trades based on exact entries, exits, and other management rules.
What Are the Benefits of Automated Forex Trading Strategies?
Ultimately, this question is self-explanatory. You will save countless sleepless nights and hours of effort with this “automated” strategy. Additionally, the system executes transactions on your behalf for multiple currency pairs. While you can do all of this manually, this system is more efficient and reduces the emotion involved in the trading process.
It is possible to monitor markets at any time or on any day using trading robots. They can also find you new opportunities while simultaneously executing your transactions.
A Step-by-Step Guide to Building an Automated Forex Trading System
The advantages of these systems make them a very attractive option for automating your own forex trading strategy.
The following tips will help you automate your forex trading system.
Designing a detailed trading plan
Forex traders know the importance of having a detailed trading plan. As a result, your automated system will be able to determine your targets and define how to achieve them. Plan your strategy based on the markets and risk/reward ratios you intend to trade on, the time it will take to operate, and the strategy you intend to use.
Once you know what your system will do, 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.
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.
Risk management tools: choosing the right ones
It is without a doubt one of the most important parts of the whole process. Stop-losses can be classified as basic, guaranteed, or trailing, depending on the platform.
A basic stop closes your position as close as possible to the specified price level. As a result, sometimes this position may be worse than the charged price. However, this only happens if the market is rapidly changing or if there are any gaps.
With a guaranteed stop, your position will always be closed at the specified level. It will, however, cost you a small premium whenever the stop is hit.
Last but not least, trailing stops are used to follow positive price movements. The benefit of this is that profits are guaranteed. As a result, the stop level isn’t guaranteed, so if the market changes quickly, it can slip.
This can also be accomplished with a limit. Limits close your transaction automatically if the price moves to a desirable level. Unlike a stop, a limit closes at your specified price or better when triggered.
Make it a code
The next step is to turn your design into code. The first step is choosing a platform and determining the coding language it uses. You should choose a design that complements the platform you plan to use. It is also important to know what can be coded and what cannot. It would therefore be necessary for you to have a decent understanding of programming and your platform. If you are not comfortable with coding, it is probably best to choose a signal trading platform like Telegram for your Forex trading platform needs.
Automated Forex Trading System Summary
If you follow the above steps, you will be able to ensure the efficiency and effectiveness of your automated forex trading system. It is important to remember, however, that the word “automation” does not mean that your forex trading is completely hands off and not observed. It is recommended that you keep monitoring your system even after it is implemented. Many problems arise without anyone being aware of them, as market conditions continually change. There are some limitations even with the best-automated trading systems in these situations.
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