Ultimate Guide to Automated Forex Trading Software

What is Forex Software?

Majority of the tools used in Forex trading are software applications embedded with features needed for analysis of the market. Forex is at a point where the type of software application at your disposal greatly affects your success.

 

Forex softwares are numerous and they are of different categories based on what they do; trading software, social trading platforms, automated Forex trading software (Forex trading programs that can trade on their own)

 

Forex software are computer programs that are used by Forex traders to trade on the Forex market. Trading platforms are highly important because they help establish a link between the trader, the broker and the Forex market which means without trading platforms traders are bound to experience difficulties in trading on the market.

 

The purpose of this article is to make shed more light on the different types of trading platforms to ensure you select the best.

 

What Is Automated Forex Trading software?

          The automated trading software is a trading platform that uses computer algorithms to monitor the market for specific conditions.In automated Forex trading, traders mark an entry and exit point for their potential positions and then the computers take over from there.

 

  A spectacular benefit of automated trading is that robots can look through different markets and securities with speed and proficiency compared to human traders. The computer algorithms help to spot a trend reversal and execute a new trade as quickly and efficiently as possible. However, automated strategies are restricted to specific market conditions especially because you need to comprehend when to make use of them. Automated strategies also fail to account for actual world market condition.

It is imperative to know that there are two types of trading which are:

·        Manual Trading

·        Automatic Trading

 

Manual Trading can be defined as opening and closing trades manually on a trading platform. This means that you strictly handle your trading by yourself and you take your time to study and analyze the market without computer robot intervention.

Automatic trading is when a software program analyzes the market and places a trade based on preset algorithms. Expert Advisors (EAs) can help to open and close trade without the help or intervention of any human.

 

TYPES OF FOREX SOFTWARE

     Forex software are categorized according to the tools they provide to Forex traders. The main categories are:

 

·        Trading platforms: These are the most important Forex programs, allowing you to open, modify and close trades. What makes a trading platform superb is the advanced charting tools and range of market orders.

·        Social trading platforms:Social trading platforms are new trends in the Forex world as they add a new social dimension to Forex trading. Social trading platforms allow you to chat with other traders as regards trading strategies, share ideas and also have an idea of the market conditions which helps guide you in your trading.

·        Automated Forex trading programs:These are computer algorithms that automatically execute trades on your behalf. They are used to make independent trading decisions based on their market analysis. They are used to open and close trade positions.

·        Technical analysis software: Technical analysis software offers you charts of historical exchanges rates and a wide range of technical indicators.

 

 

CHOOSING THE RIGHT SOFTWARE

One important decision in Forex trading is choosing the right software. In making this decision, you need to consider if the software matches up to your daily trading strategies as this is what determines your success in the Forex world.Your trading strategy is what determines the type of trading software you need.A trader with a simple strategy require a broker standard program software,and a trader with complex strategy might want to consider a software that has all the technical indicators and tools that help ensure you make fast and accurate decisions.

There are few things to consider in choosing the right software and they include:

1.      Demo Accounts

 The best way to be sure that a particular trading software would be perfect enough for your strategy is creating a demo account. With a demo account, you are able to test run the software and understand its features. A demo account is a practice account where you trade for free with virtual money using the features of a real software.

 

2.     Regional Impact

It is important to note that software varies from country to country i.e., the software in Canada is going to be different from that in Japan. A great example is the spider software which provides technical analysis software specifically for Indian markets but for Canada it doesn’t give access to data feeds and news resources that will ensure a successful trading.

 

3.     Tax considerations

Software in particular countries might give you tax problems which is why you might find a US trader investing in a trading software in South Africa because he won’t encounter tax issues from using it.

 

CHOOSING AN AUTOMATED TRADING SOFTWARE

There are important features to put in consideration when choosing the automated forex trading software that is right for you. The best-automated trading platforms share a few characteristics in common.

·        Functional Interference: As much as the computer does the bulk of the work, automated trading platforms still need to be managed and necessary adjustments carried out when necessary. It is therefore important that you choose a trading software with navigable interface that allows you make changes easier.

·        Industry standard programming language: Programming language vary from one platform to the other for example, the MetaTrader 4 allows only some specific languages on specific software.

·        Price histories for back testing: It is important for your platform to have detailed back testing which can be used across multiple timeframes.

·        Access to preferred markets: Automated software doesn’t guarantee your access to all markets for example, the MetaTrader 4 can only be used to trade Forex products specifically.


         

HOW DOES AUTOMATED TRADING SOFTWARE WORK?

     Automated trading software helps traders to analyze market information and helps them to reach a trading decision. The market information discussed above range from economic news and events, currency price charts, spread fluctuations etc.

     Forex auto trading software can carry out the following functions:

·        Automatically open trades once the specified conditions are met.

·        Closing open positions according to the specified conditions.

·        Market analysis which includes technical and fundamental analysis depending on your trading strategy.

·        Forex auto trading software also helps to limit the size of open positions at a time.

          Depending on your Forex trading strategy, automatic trading software can be programmed to trade and analyze the markets 24 hours a day and this gives you the opportunity to access all potential trading opportunities.

     Trading algorithms can be an effective tool especially for traders who barely have time to trade themselves but these trading programs do not guarantee profit. Market conditions can affect winning strategy and cause a trader to lose rather than earn profit.

 

ADVANTAGES OF AUTOMATED TRADING SOFTWARE

·        Emotional interference: One major advantage of automated trading software is the absence of emotional or psychological interference when trading. The automated software ensures your trading decisions are consistent and un-emotional, they also exploit your pre-defined parameters.

·        Pre-defined strategy: Automated strategy gives you a clear and specific trading strategy so that you can program the algorithm and you are forced to stick to a particular trading strategy, this ensures consistency in your trading.

·        Saves Time: Automated software helps to save the time you would spend on crucial activities such as market studying, chart analysis, or looking out for various economic events that influence currency prices.

·        Multiple Accounts: Automated trading software also allows you to manage multiple accounts simultaneously. This gives you an edge to seize many opportunities alongside running complementary strategies. This also enables you to spread risk over different instrument whilst still hedging against losing positions.

·        Marketing incentives: Automated trading software has marketing incentives to buy specific packages which give you extra tools for trading.

 

DISADVANTAGES OF AUTOMATED TRADING SOFTWARE

·        Lack of systematic trading training: Automated trading software requires you to have knowledge on a clear trading system for the bot to follow. If there is no trading system, you might have difficulties seeing the benefits of automated trading software.

·        Lack of knowledge in computer programming: It is important for you to have a prior knowledge about computer or algorithm programming to be able to make the most out of automated forex trading software.

·        Financial cost of using a professional coder: In a situation where you can’t code, you might require the services of a professional coder to create Forex and currency trading programs for you, which might be quite expensive.

·        Poor performance: It is important to note that not all programs are created to perform the way you might envisage, which means you are spending without benefit.

 

 

BEST PLATFORM FOR AUTOMATIC TRADING

     Three important criteria thatan Automatic trading platform must possess:

·        Intuitive: The platform must be convenient to use

·        Functional: Functionality means it shouldn’t restrict your trading strategies.

·        Professional: This platform must be usable for both manual and automatic trading.

          There are numerous trading platforms but only a few are known to be reliable and efficient. The best and most popular trading platforms include:

·        MetaTrader 4

·        MetaTrader 5

·        MetaTrader Web Trader

 

 

AVOIDING SCAMS RELATED TO AUTOMATED FOREX TRADING

 There are a lot of scams in the Forex world and as a trader you need to understand that if it sounds too good to be true that’s because it most likely is. You are most likely to find systems that promise high profits all for a low price. Here are a few tips to guide you in finding out whether a system is genuine or not:

·        Research properly and ensure you find out everything about such a system. It is also important for you to go through their terms & conditions properly before delving into it.

·        Ensure to find out if the system comes with a trial period because usually most scam systems won’t offer you a trial.

·        Check financial regulator sites for reviews about such systems as well as third-party sites to look out for testimonies about such sites.

·        Payment without proper scrutiny is a bad idea, as such, ensure you scrutinize properly before making payments for a trading account and ensure to always ask questions to avoid you losing your hard earned money.

 

AUTOMATED TRADING IN METATRADER

 Automated Forex trading programs are usually executed inside your trading platform which implies that you have to download the trading robot to your computer and place it into the “Experts” folder of your MetaTrader installation. To locate the “Experts” folder, you simply need to open the trading platform, “click on File”, “open data folder”, select “MQL4” and then “Experts”. The next step requires you to copy and paste your trading robot in the folder and then restart your trading platform.

Once that is done, your automated trading robot will be installed on your MetaTrader 4 platform. To use the automated trading robot on your MT4 platform, you can right-click on the Expert Advisor and select “Attach to a chart or click on Expert Advisors in the MT4 Navigator tab then drag and drop the trading robot to your price chart.

     It is important for you to know that the Expert Advisors are programmed in a special programming language calledMetaQuotes. The Syntax of the Metaquotes appears a lot like the programming language C, in case you have a programming background this could give you an edge and help you deliver your own trading robot. Do not assume that the trading robots coded for MetaTrader 4 will work on MetaTrader 5, no it won’t and vice-versa.

 

METATRADER 4& METATRADER 5

  The MetaTrader 4 is the world’s most popular trading platform and it was created by the Russian tech firm MetaQuotes Software Inc. The MetaTrader was created and released in 2005 and due to the fact that only a few trading software have the power of the MetaTrader 4 it fast became the forex platform of choice for Forex traders. The MetaTrader 4 is simple and has an effective interface coupled with advanced trading tools that most likely will have a huge impact on your trading performance.

          The MT4 platform runs on its own programming language called the MQL4 which is quite similar to the programming language C. It could also be merged into almost any brokerage account, allowing users to have access to the platform’s potentials without forcing them to create new accounts.

          MetaTrader 5 gives trader the opportunity to trade in markets other than currencies but uses its exclusive programming language called MQL5. Due to the incompatibility of the MQL4 and MQL5, a lot of users have chosen to stick to the MetaTrader 4 platform.

          Expert advisors are robots designed to implement automated strategies and they are the biggest selling point of the platform.  EAs can be purchased from the MetaTrader marketplace or if you can use the MQL4 programming language effectively you can write your own.

          There are a number of trading platforms that offer automated Forex trading, but the popular platform in the Forex world is the MetaTrader. The MetaTrader 4 and MetaTrader 5 is popularly known for granting traders access to a wide range of markets from a single platform alongside advanced chart functionality and it is also compatible with Expert Advisors (EAs) which enables you to carry out trades automatically. Here are the steps to walk you through adding an expert advisor to your MetaTrader chart:

·        Select the specific chart you would like to add an expert advisor.

·        Select the “Navigation panel”.

·        Expand the “Expert Advisors” menu, and then the “Advisors” menu

·        Choose your preferred Expert Advisor and drag it onto the chart. You can also double click it to apply it to either an MT4 or MT5 chart.

·        Proceed to fill your desired parameters into the popup window.

·        Proceed to the “Common” tab and check the box “Allow Automated Trading”

 

 

ELEMENTS OF AUTOMATED TRADING STRATEGY

     There are four key elements that can help you select the best automated trading strategy. These elements do not necessarily guarantee the effectiveness of any automated trading strategy as it is just a guide to help you get started.These elements will help you minimize the emotional aspect of your trading and maintain your trading discipline.

 

·        Input and Output signals

A significant amount of traders spend considerable time worrying over input and output signals in automated Forex strategy. Understanding the general logic behind the strategy is indeed important as this makes sure we do not overestimate every operation the strategy makes. It is important for you to analyze the performance of the operations as a whole and not individually. This strategy is the beginning of several operations to come. There are a few things to consider when reviewing your operations:

1.      Separate your winning and losing operations in different places.

2.      Use a set of at least 10 operations to calculate the average of your winning and losing operations.

3.     It is important to do an assessment of the net result of your last operations whether it has been negative or positive and how many pips you have generated.

4.      Replicate the winning operations with higher returns.

 

·        Strategy Logic

There are few things to consider when examining the logic behind the strategy used for an automatic trading strategy. These factors include:

1.      Risks

2.      Stop losses

3.     Objective benefits

4.      Trend

5.      Rank

          Ensure not to underestimate the market conditions in which you will apply your trading strategy this is because not all trading strategies work in all market conditions. It is therefore important you consider the environment you are in and then proceed to apply the strategy that works best.

·        Market conditions

It is important for you to choose the most suitable automated trading software for the market in which you are trading. There are two different types of market conditions.

1.      Trend markets

2.      Range markets

These two conditions are mutually exclusive. When prices remain constant and progressing in the same direction then the market is in a trend. An upward trend can be regarded as one with higher highs and lower lows, while a downward trend has a lower high and lower low.

On the other hand, ranges are created when the market is not moving up or down but the price is merging. Support and resistance levels occur when a price fluctuates between an upper and a lower limit.

The market condition your automated Forex strategy is based on should be considered critically because neither type of market mentioned above is better or worse.

·        Leverage

     This is often overlooked by automated Forex operators because traders often expect too much from automated trading strategies before they make use of them. This causes them to trade with high levels of leverage. Leverage has the power to boost your profits and as well it could also have a huge impact on your losses.

     The risk with automated trading software is that a lot of traders tend to only check out the positive aspects of a strategy and they ignore the possible losses. This often causes them to choose higher levels of leverage than they should considering their available capital, as this could rapidly lead to huge losses if the market conditions change or the Forex bot doesn’t perform as anticipated.

     When using an automatedsoftware, it is advisable that you make use of effective leverage no more than 10 times. For beginners, it is advisable you consider a lower level of leverage probably 5 times the amount you plan to invest. The reason why you should take up this advice is that if your Forex strategy experiences a reduction, you only risk a small part of your account;you would still have much more capital left to negotiate, compared to using higher amounts of leverage.

·        Learn from the experts

The best way to take your trading to the next level is by learning from those who have a better trading experience than you. 

 

CONCLUSION

 Is automated trading software as simple as most Forex or CFD brokers make it seem? The answer is “NO” but that doesn’t make it impossible. The key thing about automated Forex programs is that you need to learn to use it effectively, once you do, they can handle your trades while you spend time on other important things. Making use of automated Forex trading programs is not dependent on your level of expertise in Forex trading either as a beginner, experienced or a professional trader, Forex trading automated software can assist with your trading.

     Automated trading software should be properly monitored because there could be technical failures. Having a good trading knowledge and experience is important before you decide to use automated trading systems. There is no perfect Forex trading robot; robots excel at discovering positive trends and trade signals.

 

 

 

 

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