Forex trading using software
The forex trading business has benefited greatly from the explosion in the use of personal computers and the Internet. The proliferation of technology has made trading faster and more efficient. Perhaps the most dynamic technological development has been in the area of software. If you are used to trading manually, you may be pleasantly surprised to discover that automating your trading can save you a considerable amount of time and frustration.
If, for example, your trading style depends on sudden volatility caused by the release of certain economic news reports, you may have experienced the anxiety and stress of trying to manually set and execute your order within a time frame. very narrow before. to the expected release. If the market starts to react significantly before your trade is set up correctly, you may miss out on a potentially lucrative trading opportunity. Assuming you were able to enter the trade before the increase in price, you may still have trouble getting out in time to make your desired profit.
The software can provide a valuable solution for the merchant. Having the software do the work of setting up and exiting the trade tends to take the personal emotion out of the process. Arguably, one could even feel less guilty about a losing trade if they could blame the software. Some software packages allow you to enter many consecutive transactions in a matter of seconds. This would be impossible for a trader who manually sets and closes orders. One popular software package even provides something called “the download” that automatically closes orders when certain conditions exist. This is a highly desirable feature, as leaving a position open could expose the trader’s account to significant risk of loss in certain circumstances.
In the past, FOREX trading software was designed only for large financial institutions. Consequently, the cost of such software was extremely high. Currently, the price range of the software available to individual investors is from around $399 to several thousand dollars. There seems to be no shortage in the selection of software offered to the public trade. Many packages are sold online and usually appear in the form of a Google ad when you do a search for things related to FOREX.
The source of commercial software varies. Often the software can be developed by a sole trader with programming skills. On the other hand, it can be developed by a large corporation. As with any software, the level of technical support provided is an extremely important selling point that should be considered by the buyer. Trading FOREX can be difficult enough on its own without the complications of software that doesn’t work or malfunctions. Sometimes traders can find great support in an online forum or networking group where members come together to freely share their experience, knowledge, and skill.
FOREX trading software is often referred to as an expert advisor (EA) or robot. Certain broker platforms allow the software to directly interact with the market information that is fed through the platform. One such platform is Metatrader 4. By far, more brokers use their own proprietary platforms, which may not support independently developed software. You don’t have to be a big programming house to develop commercial software. Assuming you have programming skills, hobbyist or professional, you can design your own EA based on your own strategies and attach it to a platform designed to accommodate random programs.
As a means of testing the effectiveness of FOREX software, a procedure called back-testing is often used. This process simply involves plugging in historical financial data to determine how the software would have performed if certain underlying assumptions and parameters had been used during the prior time in question. While this procedure can provide useful information, the best indicator of effectiveness will come from future testing where the software is used in a demo or live account under current market conditions as they occur.
A special type of software is available that has the ability to take market news and interpret it in such a way as to provide trading signals to its users. Some vendors claim that their software can perform this task in a matter of milliseconds. If true, this would obviously give traders using this software a huge advantage over those using their human eyes and brain to interpret the relevant data. This rate of speed involved in delivering market news is made possible by data feeds from certain business news services like Reuters and Bloomberg. The cost is quite prohibitive for most, but it is sometimes shared by commercial groups who pay a monthly service fee to access it and spread the cost among members.
As forex trading among retail investors continues to grow in popularity, it is only a matter of time and intensifying competition before technological advances become affordable for the majority. The past few years have seen this same type of market penetration as high-speed Internet became available to many computer owners. As commercial software continues to proliferate, quality should increase as well.
Sandy Robinson, J.D.
Copyright 2007
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