Automated FX trading systems has been around quietly for a couple of years, but really started receiving a lot of exposure over the last year or two, with good reason. In this article I will explain how automated FX trading systems work and where you can find the most popular ones that are being used online today.
Metatrader is the software that made automated Forex trading available to the home user like you and me. The Metatrader software has a built in programming language called MQL4 that can be used to develop your own custom forex indicators or even complete forex trading systems (called Expert Advisors) that trade automatically according to a predefined set rules. There are many commercial expert advisors available online today and the top ones often claim very high success rates of 90% winning trades and more.
Automated FX trading systems have a number of advantages over manual trading systems -
The Stop Loss Strategy - The reason for a very high percentage of winning rates is often the fact that large stop losses are implemented. For example - one popular system has 90% winning trades, but it implements a stop loss of 250 pips. One or two losing trades with this system could wipe out an entire account.
The Drawdown - In other words, what is the worst loss (percentage wise) that this system has had in the past? This number should ideally be around 10% to 15%. To avoid unnecessary risk, stay away from products that show maximum drawdowns of 20% or higher.
The most important thing to remember is to always test an automated FX trading system thoroughly in a demo account to get familiar with its trading strategy before allowing it to trade with your real money on a live account.
For more information on Automated FX trading systems, visit my Forex Trading Blog and see my review of the Top 3 Automated FX Trading Systems here: http://fxtradingreviews.com/top-3-forex-trading-robots
Metatrader is the software that made automated Forex trading available to the home user like you and me. The Metatrader software has a built in programming language called MQL4 that can be used to develop your own custom forex indicators or even complete forex trading systems (called Expert Advisors) that trade automatically according to a predefined set rules. There are many commercial expert advisors available online today and the top ones often claim very high success rates of 90% winning trades and more.
Automated FX trading systems have a number of advantages over manual trading systems -
- They can watch all the currency pairs and execute trades 24x7, so you won't miss any trading opportunities while you are at the office.
- They trade according to mechanical rules and human emotions are completely eliminated from trading decisions.
- They can be back tested against years of historical data at the click of a button using the built-in Metatrader testing tools.
- They can be forward tested for an unlimited period of time in a demo account.
- They are easy to install and can be used by beginners and expert forex traders alike.
The Stop Loss Strategy - The reason for a very high percentage of winning rates is often the fact that large stop losses are implemented. For example - one popular system has 90% winning trades, but it implements a stop loss of 250 pips. One or two losing trades with this system could wipe out an entire account.
The Drawdown - In other words, what is the worst loss (percentage wise) that this system has had in the past? This number should ideally be around 10% to 15%. To avoid unnecessary risk, stay away from products that show maximum drawdowns of 20% or higher.
The most important thing to remember is to always test an automated FX trading system thoroughly in a demo account to get familiar with its trading strategy before allowing it to trade with your real money on a live account.
For more information on Automated FX trading systems, visit my Forex Trading Blog and see my review of the Top 3 Automated FX Trading Systems here: http://fxtradingreviews.com/top-3-forex-trading-robots
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