When it comes to Forex trading, new strategies and systems are always popping up. A popular system
that was introduced by Forex brokers is ‘automated trading.’ Automated trading, is often referred to as
system trading which requires traders to develop specific rules for trade entries and exits and then set
the computer to perform these functions.
When it comes to automated trading, there are both simple trading methods as well as complex custom
strategies that call for advanced programing. But each system requires specific software that is linked to
a broker so that the signals can be automatically submitted and filled.
The automated trading concept has a number of advantages and disadvantages. The most important
advantage is that automation eliminates considerable emotion from trading. Once a trader has set up
the system to work as desired, the platform handles the trade entries and exits and leaves the trader to
follow the guidelines rather than trying to anticipate the correct trade.
By comparison, traders using standard discretionary systems make decisions based on current market
conditions, using ‘discretion’ to decide whether to enter or exit a trade. Trying to read market events
from all over the world is not an easy endeavor and most lay traders are not analytic enough to make
correct interpretation of the data.
Depending on the expertise of professional analysts is one way to deal with discretionary trading.
Professionals have the skills and training to effectively gather the relevant information from a host of
appropriate sources and with the help of various graphs and charts and other technical tools, they are,
in a majority of cases, able to make the correct predictions for successful trading. Of course, there are
no guarantees here and sudden fluctuations in market conditions due to political, social or financial
reasons can cause even professional analysts to reevaluate their decisions and make the decision to
Another advantage automated trading is that it eliminates the potential for costly trader errors. Unlike a
discretionary trader who might accidentally hit the "buy" button when he meant to "sell" or who might
enter 10000 shares instead of 1000, if the system has been programmed correctly, the computer will
not make mistakes.
Automated trading enables levels of speed, precision and accuracy that many traders would find
impossible in discretionary trading. In addition, it allows the trader to go about doing whatever else he
wants to do rather than sitting in front of a computer watching his trade move up or down. This is
especially useful for traders who decide to trade Forex just to supplement their income rather than
making it into a full-time career. These part-time investors can continue at their regular job while the
automated system manages their money.
These beneficial aspects—ease of set up, faster execution, less errors and more-- have made automated
trading a popular option among individual and institutional traders.