Can automated forex trading software trade efficiently in the Forex markets? Can you allow a machine to decide for you when to trade in currencies?
The very fact that you must consider it before answering the question reveals a major advantage that a computer has over you. Of course the problem you have is your ability to doubt things.
Expert Advisors
Automated Forex trading software works by utilizing an expert advisor or EA. An EA is a set of trading indicators that, when the conditions are met, signal a trade. These are then programmed into a script and used in the software. It is possible to do the actual analysis on your own and you could arrrive at the same result, that a trade is possible. The important point is what happens after.
The problem with being a person is you might not trust the indicators or not trust yourself. Or you may just get some hunch and not open the trade. We are talking about predicting the future after all. An advantage with the software is that it does not think.
Predictable Currency Pairs
The other major advantage with a program is its ability not to get bored. It can basically sit before the monitor all day studying the numbers and doing the technical analysis. People often find this difficult to do.
It’s easy to get a computer to monitor for you because most currency pairs have recognizable behavior. They either trend or they range. You only have to identify the main characteristic of their movement and combine them into an EA. All the software does then is look out for these movements.
Money Management
But if it were this simple then most people would make money and not lose money like most do. Whatever system you apply it’ll never be correct all the time. This is how good money management plays a part.
By altering your risk to return ratio you can keep yourself in profit but lose some of your trades.
Say your system gave you plus 150 pips for winners but a loss of 50 pips for losers. In really simple terms you would have to win 1 in 4 trades to break even. Obviously, this is simplified but the message is your automated forex trading system does not need to be perfect.
