Automated Forex Trading Software: Should You Use It?

Forex trading has become one of the hottest forms of trading online over the past five years. Thousands upon thousands of forex traders are out there online, using countless online forex broker trading platforms to try their hand at pitting one currency against others.

This being the 21st century, technology has evolved yet again to not only offer online forex trading almost 24 hours a day, but to offer automated forex trading that can take care of your business for you (with guidance, of course).

Should you trust your portfolio to a program? Should you hand over the keys to your account to a set of algorithms? Or, should you trade the old-fashioned way – through research and practice?

Here, I’ll address those questions and help you determine if you should start using automated forex trading software (or at least give it a shot). I’ll also explain how you can get involved in this venture should you decide that approach is one you want to pursue wholeheartedly.

What Is Automated Trading?

Automated forex trading isn’t terribly different from other automated trading methods for other security classes.

Essentially, these systems are computer programs programmed to take certain actions with your account – i.e. buy euros, sell yen – if certain conditions are met. It uses a mixture of fundamental analysis and intelligence with technical analysis and lots of math to create a hands-free trading system.

Well, mostly hands free. No automated trading system exists without human hands, after all; a human at one point had to program the system, and a computer program is only as good as the instructions it has been given.

But for the most part, automated trading systems can conduct trades for you without you having to actually intervene. Methods have gotten so sophisticated these days that certain programs can even react flexibly to changing market conditions – provided, again, that the system’s human creators have programmed certain actions and conditions.

There are a few flavors of automated trading systems. Some are basic and exist to make trades based off pre-programmed conditions. For example, if, say, oil reaches a certain price level, the system can choose to buy Canadian dollars against the euro.

More advanced ones can use stop-loss mechanisms that can limit your downside risk. They also incorporate some more advanced algorithms that are designed to replicate what an actual trader might decide to do depending on certain market conditions.

Should You Use Automated Trading?

That’s a good question – and one I can’t definitively answer for you. I’ve been on record before saying that people should at least try manual, human trading before going to an automated program, and I’m sticking to that. There isn’t, to me at least, a solid substitute for the human mind, especially one that has the knowledge and skill needed to succeed.

With that being said, sometimes making that time investment to become an expert trader isn’t in the cards. Sometimes, you just don’t have time to constantly monitor an ever-changing market – especially one that can be traded 24 hours a day, six days a week.

And honestly, you may relish the chance to put the hard, stressful decisions in the hands of someone or something else.

If you meet any of the above conditions, then automated forex trading may be right for you. If you want control, though, you may want to forgo the trading robots and try your hand at trading yourself.

Getting Started and Finding the Right System

If you want to get into automated forex trading, though, you can certainly do so – there are several systems out there that offer the chance to invest your money without having to stress over trading or dedicate hours and hours of your time to learning the trade.

The main tip I would give is this: Ignore systems that claim to work “all the time” or “most of the time”, or claim success rates of “over 95%” or something ridiculous like that. If you think it might be too good to be true, it probably is – meaning you’re throwing your money away.

Also know what you’re getting. Some are fully automated systems, meaning they do just about everything for you. Some are only semi-automated systems, meaning they crunch numbers and provide you with trading signals but do not actually pull the trigger themselves.

Others simply provide you with analytics and real-time market intelligence and awareness. That’s valuable, sure, but it isn’t automated trading.

Arguably, the main platform used for automated trading is MetaTrader 4 (MT4). This system can help you trade; it can also automate trading for you, and many traders place MT4 software on things called ‘virtual private servers’ that enable them to automatically trade 24 hours a day, seven days a week. You can even download and install programs and scripts called ‘Expert Advisors’ (EAs) that plug into MT4 and help automate your trading even further.

One note of caution, though: The phenomenon of ‘curve fitting’ means many of these EAs don’t work over time because while they explain past performance and past data in the market, they often lack predictive power. In other words, any curve – or any financial result in the market – can be explained by a mathematical formula. That doesn’t mean the formula or algorithm is capable of predicting the future.

Whether you are looking for complete assistance or trading help, consult online reviews for providers of automated trading services before you send them a single penny of your money.

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