Forex automated trading is one of the most startling innovations to impact the market since its inception. Algorithmic trading has played an important role in the unprecedented expansion of Forex trading in the last ten years. How is it that technological advancement has transformed Forex trading so radically in such a short period of time? Let’s take a look at what happened.
The massive influx of new traders that has marked the last decade of Forex trading is for the most part made up of professionals, working independently and not necessarily in the financial sector. With the gradual improvement of Internet connections, the ubiquity of home computers and the emergence of easy to use trading software like Metatrader 4, it suddenly become possible to manage a Forex trading account from the comfort of your own home.
Not only that but people also had access to expansive educational tools via the Internet. For the first time an education in Forex trading was free as anyone could open a demo account and start practicing their trades. New traders also formed forums and began to learn from each other.
Better Forex education and instant Forex data streaming across the globe led to the rise of Forex automated trading. Modern trading software like MetaQuotes’ Metatrader line offers traders the option of automating their trades by setting parameters for when the application should buy/sell a certain currency.
A typical example of Forex automated trading would be to have your account buy gold when the dollar fell below a certain value. The advantage of algorithmic trading is that it reduces workloads significantly for minor trades and prevents traders from being caught at unawares by unexpected market fluctuations. The biggest disadvantage is the loss of control it entails. For example while gold usually rises when the dollar falls is does not necessarily do so all the time, if both gold and the dollar fall the trader could experience an expensive loss.