Automated trading systems have become extremely popular with Forex traders. Before we dive into the basics of automated trading systems let’s define what it is. An automated trading system is trading software which will and exit points for trades. Not only will it select the entry and exit points it will execute trades on the trader’s behalf without the traders intervention.
There are those who like and those who dislike automated trading systems for a variety of reasons. Longer-term traders haven’t really found a good reason to use any type of automation as their entries and exits are relatively infrequent and can be entered manually quite easily. Short-term traders such as swing traders, daytraders, and Forex scalpers may find automating their trading strategies to their liking. If, for instance there is a trading strategy that enters and exits numerous times during the day, then in automated Forex system may be the correct choice for that type of trader.
Technology and automation are wonderful things when used correctly. They can certainly make the lives of the trader much, much easier and allow us all to trade more efficiently and effectively.
There’s a challenge with automation, however. It is really quite simple. An automated system is only as good as the system and automates. In other words automating a bad trading system will only allow you to lose money automatically and hands-free fashion. Although that statement is obvious, a surprising number of people still allow automated systems to trade their account without understanding how the system works.
One of the biggest dangers of automated trading systems is that these days they are very easy to produce. Their software available that allows you to create an automated trading system as well as back test that system. Unfortunately, many who venture out to create their own systems either for themselves or for sale to others have not learned how to properly evaluate a Forex trading system. Quite logically, not knowing how to evaluate a trading system doesn’t really leave you in a good position to create one that will work. With that said, it is important to learn to evaluate trading systems prior to creating your own.
If you are inclined created an automated trading system the first thing you’ll need to do is to learn how to create a robust trading system. That will, of course, include learning how to evaluate trading systems. By learning how to evaluate trading systems you will learn to create and choose those systems which are best suited for you.
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