Forex autotrading is a trading strategy where forex buy and sell orders are placed automatically based on an underlying system or program. The buy or sell orders are sent out to be executed in the market when a certain set of criteria is met.
Autotrading - and systems, or programs to form buy and sell signals -, are used typically by active traders who enter and exit positions at a much higher rate than the average investor. There are also a wide range of systems that differ on the set of criteria used to generate the buy or sell signals. Typically, the criteria used are more technical in format - in that they focus on price movement and technical indicators[1].
History
Forex autotrading originates at the emergence of online retail trading, since about 1996 when internet-based companies created retail forex platforms that provide a quick way for individuals to buy and sell on the forex spot market. Nevertheless, larger retail traders could autotrade Forex contracts at the Chicago Mercantile Exchange as early as in the 1970s.
Types
Today, there are two major types of Forex autotrading:
Fully automated or robotic Forex trading: This way of autotrading is very similar to algorithmic or black-box trading, where a computer algorithm, or Expert Advisor (EA), decides on aspects of the order such as the timing, price, or quantity or initiation of the order without human intervention. Users can only interfere by tweaking the technical parameters of the program; all other control is handed over to the program. Examples of such robotic EA’s are, Fapturbo, PipZu etc.
Signal-based Forex autotrading: This autotrading mode is based on the concept of auditing traders all over the world and making their strategies available to anyone interested in the form of signals. Then traders have the ability to automatically convert any of these signals to real trades in their broker accounts. Human interference here is augmented; signals come from live traders while users can actively select to follow a Signal Provider whose strategy fits their risk profile. Examples of such platforms are: ZuluTrade, Rent a Signal etc.
Advantages
An automated trading environment generates fewer trades per market than a human trader can handle, it can of course replicate its actions across multiple markets and timeframes. Furthermore, it is far less restricted in the number of intermarket opportunities it can observe and act upon. An automated system is also unaffected by the psychological swings that human traders are prey to. This is particularly relevant when trading with a mechanical model, which is typically developed on the assumption that all the trade entries flagged will actually be taken in real time trading
Signal Provider based models have the advantage that they offer traders the opportunity to follow previously successful signal providers or strategy with the hope that the advice they offer will continue to be accurate and lead to profitable future trades. An added advantage is the accessibility offered by these programs as traders do not need to have expert knowledge on Forex but only have to select a system, making Forex trading possible to anyone.
Forex autotrading services can be offered for free, on a spread basis (ZuluTrade) or on a one time fee basis (Fapturbo).
Regulation
As an unregulated and highly profitable market, the Forex market is extremely attractive to scammers. Forex autotrading, as it brings Forex trading to the masses makes even more people susceptible to frauds. Bodies such as the NFA and the SEC issue warnings and rules to avoid fraudulent Forex trading behavior on the web
No comments:
Post a Comment