Automated Forex Trading: Clever Yet Effective Technology
Why Automated Forex Trading?
This is probably one of the questions that you need a reasonable answer. There are hundreds of investments out there that you can prefer, but why go trading foreign currencies instead?
Forex investment is unique in various aspects.
* Its trading volume is relatively huge compared to other markets.
* It has extreme liquidity or the capability of either buying or selling the currency without causing significant movement in the market price.
* It has the largest number and variety of traders.
* It is one of the markets that have long trading hours (24 hours each day, except during weekends).
* Trading locations are almost everywhere, not just in the United States or major cities of Europe.
* There are different factors that affect foreign exchange rates.
Forex Trading Facts
Another whooping fact that will make you excited to go on Forex trading: it has an average turnover in traditional foreign exchange market of around $3.98 trillion daily, according to the Triennial Central Bank Survey of the BIS (Bank for International Settlements). Here are the daily averages of turnover on the Forex market from 1988 to 2007. The last 3 years has seen even faster growth rates.
Source: BIS
Forex Trading Automation
The concept of automation becomes is a growing trend in the foreign exchange trading market. The Interbank spot Forex market has also considered switching to the automated method as well.
There are several benefits that a Forex trader can derive from automated Forex trading.
* Through automated process, transactions can now be done in real time. Although manual systems have existed for quite some time now, it is difficult to achieve such benefit that the automated Forex system can offer to its traders. All of the trades can happen within a few milliseconds and can be a big plus for automated transactions against the manual system. In fact, there are problems that are addressed using automated Forex trading especially if the trader is losing a few times in a row that prevents him from making new trades. Such problem could be addressed using the automatic trading system.
* With automated Forex trading, you will have a greater diversification. It means that you can trade in various markets in different time zones at a time. You can execute trades with traders from Singapore or London even it is already 12 midnight in the United States. This benefit allows you a multiple exchange model option. You can use varying trading models to evaluate short-term data. This means that you will be able to predict the trend for a shorter period of time, let us say from fifteen minutes to half an hour.
* As previously mentioned, the Forex market is unique because of its extreme liquidity. This liquidity is increased when the market goes automated.
* Risk management problems are solved through automated Forex trading. International checks, which are commonly used in making purchases on Forex market, are synchronized through automated technology. Since the transaction in an automated process is now on real time, there is a slim chance that the payments will be delayed, reducing the risk of non-payment by either parties. Although there are problems noted with the use of the automated system, it can be fixed through consistently-updated technologies.
With automated Forex trading market, the prediction of $2-3 trillion average daily turnover within the nest 8 to 10 years can be changed within the next 4 to 5 years. Given the quick yet efficient trades on varying time zones, automated Forex trading will now be among the existing lucrative business around the world.
