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The Fundamentals of Forex Auto Trading

October 30, 2011 · 1 comment

in Forex Trading

forex auto trading systemsAs Forex trading grows more popular, a trend of Forex auto trading is gathering pace. Today’s economic instability makes foreign exchange market look like a right place for a safe investment. And so many people want to invest, even those who have never traded Forex and have no time (or just don’t want) to spend much studying the subject. So they turn to automated Forex trading systems.

Of course, there is a big chance to be scammed when choosing an auto trader. Harsh reality. However, there are also very legitimate and worthy auto traders who can help a beginner to earn some good money. Furthermore, I will give you the vital tips on how to use your auto traders with maximum efficiency.

Before you start a Forex automated trading, you should decide which kind of trader you are. Even if you trade an “old-school” way. Are you the one targeted to make a huge profit in a single position, but take risks? Alternatively, would you go for smaller profits with smaller risks? These are the questions for you before making any decisions and taking important actions.

So, you already know which kind of trader you are. Then you must understand the two crucial points.

Point 1. All the auto traders are the systems. Any of them is programmed and distributed individually, meaning all intents, purposes and strategies. If you decided which trader you are, choose a strategy to accompany your trades. For instance, strategy of smaller profits and minimal risks tells the system not to lose more than a certain number of pips per trade. All the trading process (time, period, progress) can be seen in a special graph. Again, you are to decide on your trader type and the strategy.

Point 2. You let the auto trader do the job for you (hands off and go for a walk!). All of a “human” interruption is about applying basic statistics and filtering out the systems which mismatch your trading style chosen. When “automated,” you choose systems, not pairs! So the system defines your trade opening. If it supports the pairs, you choose, they will be traded by it.

If you understood and accepted the above fundamental principles of auto trading, you are ready to choose your systems. You should define the basic system parameters and apply a filter for the whole list of systems available. This should include:

  • The system’s maximum drawdown in one position
  • Number of months since the system started bringing profit
  • Statistical information on 30 trades (less is not enough for accurate analysis).

And here comes the ATTENTION sign! These are basic filters – best results require more complex statistical checks in addition.

For instance, compare the results of two filters – current and previous. One of the primary factors to compare is the percentage of profitable positions. If a system is 40% profitable, it brings you a loss of 60%. You wouldn’t trade this one, for sure, unless other options are much worse.

So now you determined the system with highest win ratio from the list. Then you should check the number of positions, which can be opened simultaneously. For example, some systems offer you one position and some offer four, in this way increasing your exposure in four times.

Inside the System

If your relevant system’s list became as short as modern girls wear skirts, firstly, you need to examine a system’s chart. Yes, Sherlock, it’s time for the detailed investigation! You can view the chart direction in a certain time period. If you are a non-risky trader, you don’t need the system chart to display extreme movements. You would like to be sure the chart is crawling upwards in small increments.

After you are done with the chart you can go to the screen describing each position opened and used by the system. Detailed information about its past and present transactions is at your hand:

  • How long they were open.
  • Date of position opened/closed.
  • Your own common sense preferences on how the system trades.

After you decided on the most suitable system for your needs, remember the following things. Firstly, you bought a car – so drive. You choose a Forex system, so stick to it. Controlling your emotions makes your system benefit for you in full. Then you may think of a period to perform the above filters again. Forex market is fluctuating, and your system could mismatch your criteria next month. It also happens in an opposite way. It hasn’t met your requirements this time. The system might amend next time.

The number of filters to perform (each week or month) depends on your personal configuration. So hold on to the fundamentals and stick to your system. Good luck!


Written by Alexander Collins

Alexander Collins, who is the owner of Forexeasystems company that can be reached at Forexeasystems provides automated Forex trading software as well as cool Forex freebie for trading the News. If you want to grab one free copy, just search “Forexeasystems FX Pulse.”

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{ 1 comment }

Alexander Collins October 31, 2011 at 9:21 am

Hi everybody,
Feel free to ask me any question related to automated trading.
Alexander Collins recently posted..Forex Analysis – Fundamental AnalysisMy Profile

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