Automated Forex Trading

Automated forex trading is an algorithm-based, hands-off approach to trading. An automated trader is a computer program that analyses price patterns, decides whether to buy or sell and executes the trade. Human intervention resumes to choosing and tweaking trading algorithms based on performance.

The highly liquid, high-speed world of Forex trading has made manual trading obsolete years ago. Institutional traders have been using algorithmic trading for quite some time now. The technology has only become available for retail traders relatively recently, however.

The Best Brokers For Automated Forex Trading

Forex.com boast a global reputation. Regulated in the UK, US, Canada and Australia they offer a huge range of markets, not just forex, and offer very tight spreads and a cutting edge platform.
Automation: Automated trade supported through trading platforms (MT4)
NinjaTrader offer Traders Futures and Forex trading. Use Auto-trade algorithmic strategies and configure your own trading platform, and trade at the lowest costs.
Automation: Yes. NinjaTrader is a dedicated platform for Automation.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Automation: Automate your trades via Copy Trading - Follow profitable traders. Open and close trades automatically when they do.
75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
Automation: Zulutrade are market leaders in automated trading. From scripts, to auto execution, APIs or copy trading.
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Automated Forex Trading Explained

Despite the increasing complexity of the technology involved, automated forex trading mostly makes use of technical analysis. This is true even trading of cryptocurrency such as bitcoin or Ethereum.

A simple example of an automated trader would be the following: a trader codes a program, instructing it to buy a certain currency against another when a shorter-term moving average moves above a longer-term MA. The trader also sets the program to sell the same currency once its price gains a certain amount of pips.

The program can then buy and sell this currency without human intervention.

There are trading platforms like MetaQuotes’ MT4 and MT5, and TradeStation, which allow traders to build automated traders (so-called Expert Advisors, or EA’s) based on a rule-set rooted in technical analysis.

MT4’s programming language is MQL4. EasyLanguage is TradeStation’s version of a simple coding language for auto traders. Python and R are suited for the programming of automated Forex trading systems as well.

Does Automated Trading Work? Is it Profitable?

Automated trading works. As mentioned, institutions have been using algorithmic trading for quite some time now. For someone looking to make a living trading, automation is a necessity.

You do not have to take anyone’s word regarding automated trading profitability.

You can create/buy an auto trader and put it to the test. Most platforms that support this type of trading allow back-testing.

Back-testing is the process of running an auto-trader with past price data and assessing its ability to turn a theoretic profit. Such systems are available on Demo accounts, so the trader does not have to risk any real money on them.

A reasonable starting point for auto trading is to automate the trading strategies you already use manually. Whatever you can represent in a scripting language like MQL and EasyLanguage, you can automate.

You do not have to be a scripting language expert to use automated Forex trading.

Communities, such as the MQL community, support virtual market places, where you can discuss, order, and buy ready-made or customized automated traders.

Forex Robots Automated forex trading

Automated Forex Trading Software

There are three basic types of trading automation.

Fully automated trading systems derive their trading signals and they execute the trades.

Such systems are also known as trading robots. Robots allow human intervention through settings concerning lot size, take profits, stop losses, and various other risk-managing parameters.

Signal generators derive trading signals from technical analysis. A trading signal comprises information about the entry/exit price, TP/SL, timing, etc. The trader manually executes trades, based on such signals.

Copy Trading

Copy trading is about finding an experienced trader and copying his/her trades. Most copy trading platforms automate this process.

The user selects a trader, sets the system to “follow” or “copy”, and his/her account automatically executes the trades of the copied person, until manually stopped.

Broker-based Automated Trading Platforms

Different Forex/CFD brokers support different trading platforms. Most modern trading platforms offer some type of automation. The best-known and most popular such platforms are:

Some brokers feature proprietary trading platforms that may or may not offer automated Forex trading. This is one of the reasons why some traders prefer brokers that support one or more of the mentioned trading platforms.

The listed platforms offer a wide range of automation-related features. MT4 and M5 cover every possible need that may arise in this regard. From social trading to trading robots and massive community support, these platforms have everything.

ProOrder has no social trading and its programming language is BASIC-like. eToro, on the other hand, does not feature algorithmic trading and trading robots.

Trading Signals

Many brokers run trading signal services. Some offer this service for free, while others charge a subscription fee for it. Some brokers have teams of experts churning out trading signals. Others rely solely on automated analysis.

The human factor is an important component of a quality signal service. Humans will mix the fundamentals with technical triggers. They will take various economic indicators into account as well.

Robots

Forex trading robots generate trading signals automatically. They also act on these signals without human intervention. Thus, they completely remove the emotion-based element of trading.

A word of caution regarding the profitability of Forex trading robots : these sequences of code are not infallible. Even the most profitable ones need tweaking now and then.

MT4

Metatrader 4 (MT4) is a currency and CFD trading platform. MT4’s creator is MetaQuotes.
Due to its advanced charting features, technical indicators and impressive functionalities, MT4 is the most popular online trading platform.

MT4’s Expert Advisors are some of the most popular automated Forex trading solutions.

Free Automated Trading Software

People are usually right to distrust free, too-good-to-be-true deals. With automated trading systems, the situation is a tad more nuanced, however.

There are no guarantees that expensive automated trading software will outperform its free peers. That said, if people put real effort into a solution, it is likely to be more profitable than a simplistic, haphazard piece of software.

MT4’s Expert Advisors are a great example in this sense. You will find free EAs. Some may even be profitable. There is, however, a vibrant market place around these auto traders. It is safe to assume that you will have to pay money for more advanced EAs, that are more likely to be profitable.

Scammers will sometimes try to hand you free automated trading software, to then require you to sign up with a certain broker.

This way, they can pick up the commission resulting from your registration. Such scams are relatively easy to spot, however. If it seems to good to be true, it almost certainly is.

Expert Advisors

MT4 and MT5’s Expert Advisors represent the gold standard in automated Forex trading. People code these trading programs in a C++-like language. Expert Advisors automatically monitor financial markets and identify trading opportunities based on parameters set by the user.

The benefits Expert Advisors offer are obvious:

  • They save time.
  • They eliminate emotions from the trading equation.
  • EAs can handle any market supported by MT4.
  • MT4 allows the importing and installation of any third-party Expert Advisor. You do not have to code your own.
  • Traders can back-test their EAs before letting them handle real money trading. Please note that back-testing does not account for slippage.

That said, EAs are not foolproof. Their most obvious shortcomings are:

  • Some Expert Advisors are not “experts” at all. They are simplistic bits of code thrown together in a hurry.
  • Unless you rent a VPS, your EAs will only run when your computer is running.
  • No EA can match the analytic capabilities and flexibility of an expert human mind.

Automated Trading Apps

A trading app is just a trading program, much like the mentioned ones. MT4, MT5, and other trading platforms are available in mobile versions as well. Some of these mobile apps support the use of automated trading solutions such as EAs.

How to Use Automated Trading Best

To optimize your automated trading, you should observe a few unspoken rules.

  • Be aware that you need to know your manual trading before you turn to automation. You should also have some trading experience.
  • Do not place blind trust in technology. Even the best automated Forex trader needs monitoring and occasional tweaking.
  • To minimize the likelihood of mechanical failures, use server-based trading platforms and automated traders.
  • Understand that the capabilities of automated Forex trading are limited. Do not fall for scams promising you guaranteed profits.