Automated Forex Trading Software

Automated Forex trading software has become extremely popular these days. One reason for its growing popularity is the increasing number of short-term traders. Short-term traders love the set-it-and-forget-it nature of trading using this type of software.

So what is “automated forex trading software”? Automated forex trading software is software desgin to trade the Forex market in a hands-free fashion. This simply means that no action is needed on the part of the trader. Sounds like a dream come true doesn’t it? Well, yes and no. Let’s dig a little deeper into the pros and cons of trading using this type of software.

Pros –

1 – Trades without trader intervention. Can trade for you while you are plauing golf or on vacation
2 – Can react faster than a human can react. Software can take action faster than a human can.
3 – Can minimize frivolous trading. Trading software will trade in an unemotional fashion. It will do what is told to do when it it told to do it. This can be a big advantage for traders who have challenges exercising good trading discipline.

Cons –

1 – Typically has its logic hidden. This means that the user has no idea what makes the system tick. Any trading software with hidden logic is referred to as a “black box” system. If you don’t know the underlying logic of an automated system how can you tell if it is working as it should be working?
2 – Doesn’t encourage learning Forex trading and individual analysis. Automated software can actually make you a lazy trader. The exception to this is if you do your own research to create your own automated systems.
3 – Most commercially available Forex trading systems do not work. This is about the biggest “con” you can possibly think of. The good news is that you don’t have to rely upon someone else’s expertise (or lack thereof) to trade Forex successfully.

If I were to ask new traders what they think of automated software they would all tell me that its the greatest thing since sliced bread. If I were to ask those same traders if they were making money with their software it is likely most of them would tell me no. Why is that? One reason is that automation sounds sexy. If you tell a friend that you have your own personal “Forex trading robot” trading for you it is likely your friend will be impressed. It is almost as if automated trading carries a certain level of status with it.

So is automated Forex trading software good or bad? Neither. You see what really matters is if the trading system inside the software works or not. If the system does not work then we are only automatically manufacturing losing trades. Quite obviously, that is not our objective. In most types of trading automation isn’t really a necessity. If you do happen to venture into automated trading make certain you understand how the trading system works. It is also a good idea to trade the same system manually and compare results. This way you can ensure that the automation is executing trades as it should.

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