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The Advantages Of Automated Forex Trading Software

By plrprousers | November 25, 2008

Can automated forex trading software really be efficient in the money markets? Is it really possible to let a machine make choices for you when you trade in foreign currencies?

The very fact that you have to consider it before answering the question reveals a major advantage that a machine has over you. If you haven’t got it yet the answer is human emotion.

Expert Advisors

Automated forex trading software works by utilizing an expert advisor or EA. An EA is a set of trading indicators that, when the conditions are met, signal a trade. They’re put into a program script and packaged into a piece of software. If you did the calculations yourself you could reach the same point, ie. a sign to trade. But what happens next?

The issue people have is they sometimes query the signals and doubt their reliablity. You might also get a feeling that it’s not a great time to trade. This is a future prediction after all. The advantage with the program is it does not hesitate.

Predictable Currency Pairs

One more big positive point is a program does not get fed up with all the figures. In reality it will be a like nerdy kid watching the PC monitor day and night thinking about the numbers. Humans have a lot of difficulty doing this.

It is easy to have a computer to monitor for you because most currency pairs have predictable behavior. They either range or they trend. You only have to identify the main characteristic of their movement and combine them into an expert advisor. All the software does then is look out for these signals.

Money Management

Of course, it isn’t that easy or 95% of traders would not lose their accounts. Whichever system you use it will never be right every time. Because of this you need to protect your money properly.

By altering your risk to return ratio you can keep yourself in profit but lose some of your trades.

Say you dropped 50 pips for all losing trades, but gained 150 pips on your winners. Basically you just need to win one from four trades and you would not lose overall. This is obviously simplified but the message is your automated forex trading system does not have to be perfect. 

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