What is Automated Forex Trading?

copy-trading

If you are sick of your emotions getting in the way of a good trade it might be time to consider Automated Forex Trading or generally known as Copy Trading. Particularly popular in the forex market, Copy trading lets you mimic the trades made by winning traders. Although it sounds simple enough, here is some information that will help you decide whether to use Automated trading.

Automated Forex Trading is a method that allows the trader to select from a host of strategies and implement them without personally managing their account. The strategy that is chosen is executed on the trader's account. The goal of this type of automation is to keep the instincts and emotion of the winning trader while executing a trade strategy with the ruthless efficiency of automation.


What are the advantages of Automated Forex Trading?

Automated trading is extremely transparent than Robot trading. Some advantages includes :

  • There are wide selections of trade strategies available. This means the trader can find the perfect strategy for his/her goals and ambitions.
  • Since each strategy is a copy of a live trader, results can be seen before implementation. Often automatic robot traders have patchy performance records that are not even up to date. With Automated trading performance can be seen daily so the trader knows exactly what they are getting. Also, copy trading performance data includes very exact statistics including the maximum drawdown. This is an important statistic for any trader. It is the highest single loss incurred by the program. Traders should be wary of programs with a high drawdown, since a really high drawdown could wipe out many traders.
  • A copy trader is emotionless. The trader does not need to be concerned about when to enter and exit a trade as it is all automated.
  • In most cases, copy trading is a fully online program that will run all the time whether or not the trader is on their computer. Traders must be wary, this means the strategy is always executing even when their computer is not turned on.
  • With Auto trading your ability to make manual trades is not hindered. You can manually trade while also running one or more copy traders.

The advantages of auto trading are numerous, but the trader must be careful to weigh the strength of each strategy individually. Each trader must have a goal in mind so that they can determine what each strategy will offer them. Also it is important to make sure that the strategy chosen has a long trade history. This is the only way that an accurate picture of the strategy performance can be ascertained.


Disadvantages of Automated Forex Trading

Although it seems simple, there are disadvantages traders must be wary of. It is up to the trader to read the fine print on any performance records since not all results are from live trading. Sometimes strategies will also report only a partial view of recent results. Here are some other things to watch out for:

  • No market is stagnant. If a forex pair has been a certain range for a long period and the value begins to trend, then an automated trader may not be able to handle the new market parameters.
  • A copy trade account may be much larger than the accounts used by the average trader. While a few losses in a row may only put a dent in the copy trader's account it could wipe out smaller traders.
  • Basically, a chosen strategy operates forever until the trader chooses to end it. Traders must be careful to monitor results for themselves.
  • Reported results are from closed positions which do not always reflect the total risk to the trader. While the final loss may be only 100 pips, it could have been offside 200 or 300 pips. A trader choosing a strategy must be sure to check how much a strategy is willing to allow a trade to go offside.
  • Summary results can be misleading. A trader should go through the entire trade history to see if it includes hypothetical gains returned during testing or an initial launch phase.


Implementing a Automated Forex Trading Strategy

Automated trading is not offered by every broker. If a trader wants to use copy trading they will have to find a reputable broker that offers the service. There are also third-party programs that can work with a variety of brokers to place automated trades. This is a great way for a trader to get started auto trading without having to open a new account.

Whether they are using a third-party program or a broker that offers copy trading, the trader will have to go through each strategy individually and decide which ones to use. The trader must then authorize the broker to place the selected trades in their account. Confirmation should be provided by the broker or third-party program. There are then several parameters that need to be set. The trader must choose how many lots to trade on each signal and how many lots can be open at a time. Once done the trader can sit back and watch the strategy perform.


Conclusion

In the end, it is up to the trader to decide what strategy to use. If they want to use Automated Forex trading they must scrutinize all the statistics and manage the risk involved. As with any trading, they must be aware that there are no sure bets and markets are always changing. But, if they manage their risk vs. reward properly success will come.


Checkout Some Profitable Automated Forex Trading Systems 

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