Analysis of Using Automated Forex Trading System

There are both advantages and disadvantages of using an automated forex trading system.  If you are looking to get one of these software platforms, go in with your eyes open.  The software vendors will only tell you one side of the story.

There are many advantages to incorporating your forex trading strategies into these software platforms.  First of all, you can either choose to program them yourself, use the technical analysis algorithms already programmed into the package, or do a mix of both.  They are usually versatile in when they enter and exit a trade.

The second advantage is that you essentially take yourself out of the equation when it comes to execution.  Here’s a surprising truth about forex trading.  You may have a great forex trading strategy that gets consistent wins.  But the reality is, most of the time it gets screwed up in the execution.  That is because the human component is so strong.

Although we can be rational beings, we act in surprisingly irrational ways.  That is never more true than in the high intensity and high pressure world of day trading.  In order to eliminate yourself from the execution, you can use automated forex trading systems.

In fact, many forex investment funds use it as well.  Except with these funds, they are usually proprietary trading platforms.  That means they have built and developed it themselves without the intent of selling it.  This gives their forex investing an edge over their competitors.  It’s their black box if you will.

One downside to automated trading is that it is almost solely based on technical indicators.  Technical analysis is where you identify chart patterns and formations, like head and shoulders, to look for entrance and exit points for trades.   A lot of research has shown that this technique, especially if used exclusively, does not work over time.  You have to mix a little fundament analysis into the mix or you won’t be successful.