Algorithmic Forex Trading

Algorithmic Forex trading is a logical result of combining

technical analysis with computer programs.

After all, if you always make the same trade under the same circumstances so why not

program the computer to make the trades? In algorithmic Forex trading the computer follows the price of one currency pair versus

another.

It tracks any data that you want it to track and then makes trades

under the circumstances that you tell it to in the programming.

Sounds like it should be profitable, right? Certainly a lot of big trading

houses use algorithmic Forex trading.

Should you? With profit from changes in foreign currency rates

as our goal read more about algorithmic Forex trading.

An Efficient Way to Trade Currencies

To the extent that algorithmic Forex trading always leads to

profits it is a great idea. You can simply pick the Forex pair, select

the trading program, and walk away. If the program is smart

enough perhaps you let it pick the currency pair.

If you tell the program when to start and when to stop and when to get out if there are problems algorithmic Forex trading takes fear and greed out of the picture

and could lead to nice profits.

To the degree that you keep it short and sweet, picking the most profitable Forex pair and briefly trading it could result in reliable

profits. Now let us look at the dark side of algorithmic Forex trading.

How Much Information Do You Need to Make a Profit?

One of the reasons that programmed trading is usually

limited to large trading houses is that you need a lot of information about a lot of things to routinely

profit from algorithmic Forex trading.

The business of picking a pair to trade can be simply one of

technical analysis or it may require picking information out of the

news for analysis.

Analyzing text in many languages takes the level of difficulty up a

couple of notches and puts this out of the range of the average trader.

How Fast to Do You Have to Process Data to Avoid a

Disaster?

A really fast computer that is well programmed can make decisions and place trades in tiny fractions

of a second. Being in second place in this race to place trades can spell the difference between

success and failure.

Having staff on hand to make changes in computer code can be

invaluable and is not a service that is available to the average trader.

Speed is often of the essence when reacting to market changes, which

is the province of algorithmic Forex trading.

This puts the average trader at a constant disadvantage if he or she chooses to compete on the basis of

reaction time or data processing ability.

What Are Your Options?

Despite our comments above about coming in second, technical

trading still works but so does sound fundamental analysis. If you

can see a change in the market coming, you can buy Forex

options, puts or calls, on one currency using another.

This gives you the right to exercise the contract and make a profit from your good judgment and

forget about split second execution or massive processing of data.