Many alternatives are available to you in the forex world when selecting the program you want to utilize.
You can use this brief guide to evaluate which automated forex trading program suits you.
Finding the best algorithmic trading software can take hours of study, but it’s worth finding what works best for you. But don’t worry, the Pearl Lemon Invest team has already done the grunt work.
Table of Contents
What is automated trading
Automated trading software is a technique that uses algorithmic software tied with a trading platform to automatically execute trades. Depending on the platform and algorithm, there is also the possibility of the trader being able to set certain entry and exit points as well.
Pros of automated training
- There is a removal of human emotion
- There is a reduction of stress
- Trades are executed faster
- There is no deviation from strategy
- Lower transaction costs
All of these make excellent points to why automated trading may be best suited for you. To further break down the above points… the reduction in human emotion and stress can potentially lead to fewer errors. Afterall, we as people are driven by emotion, so that can cause rash decisions to be made.
Faster execution allows for trades to occur immediately without delay and a lack of deviation means that what is set will happen. Some traders may have trouble sticking with their plans, so having a system in place that prevents from straying away can help some traders.
Cons of automated training
- Lack of control of executions
- Strategies in backtesting may not play out properly
- You can over-optimise your strategy
- There may be questionable success rates
Now, after looking at this list of cons, don’t dismiss the possibility of having automated forex trading software. Lack of control is an issue for some, but not all traders. This comes with the territory of needing to give up decision making and leaving it to the software to make the choices. Some simply do not like giving up that level of control.
Other cons like backtesting issues or over-optimisation can pop up for some as well though. Backtesting is a process designed to test an algorithm before it goes live. The tests occur by running the algorithm against historical data and seeing how it may perform…once it hits the live market though this may not play out the same. This ties into questionable success rates as well though. Pairing some unknowns in a volatile market could lead to varying levels of success.
It should be noted that there is one more con that outranks the rest on the above list. This is SCAMS! Scammy platforms have a way of enticing traders, taking their money, and leaving them with empty pockets. This is why research at an in depth level is so critical.
How Popular is Automated Forex Trading
Automation, for more than just Forex, makes many tasks easier. For Forex traders in the US alone, 70% of all traders are using an automated system. Now, this stat alone should speak volumes in terms of what the crowd prefers. Although this may be for a variety of reasons as outlined previously.
A smart trader knows that a partner may be able to help carry them further. This partner should be able to react without emotion, with logic and stick to the plan, be knowledgeable and dependable….these traits all fall in line with an automated software.
What to Look for in Trading Software
First, make sure that the market you want will be available with the software you choose. Not all softwares access all markets. For example, if you want to trade more than Forex, Metatrader 4 will not be your best option because the platform only trades Forex.
Be sure the interface is friendly enough for you to use. Although the algorithm pulls the bulk of the load, you still want to be able to log on and manage your dashboard and make any adjustments if necessary.
Next, look into the programming language you will want to use. This is if you may want to make adjustments and try to take on an advantage in addition to the software. Some platforms only allow certain programming languages, so be sure if this is a route you want to take that you will be able to perform what is desired.
For one last bit of research notes, be sure to ask for charts and performance in backtesting. Charts can help shed light greater on how the software and algorithms will perform and have performed. Asking for this information will prove beneficial rather than following a program blindly.
The Best Automated Forex Trading Softwares for 2021
Metatrader 4 was a Russian developed software originally launched in 2005. This platform has become a highly desired and well followed platform since its launch.
This trading software has multiple integration features, so a user will not have to open new accounts, but rather continue with another or different brokerage account.
Metatrader 4 runs on its own programming language, so it may not be best suited for those looking to program their own moves. Although, the programming that it runs is similar to languages like C.
Metatrader 4 is seen as best for new traders looking to get a good feel at data language and experienced traders looking for a more data-rich experience.
It can also be noted that there is now a Metatrader 5, but many users opt to stay with Metatrader 4 because the programming languages are different, so they are incompatible with one another.
eOption focuses on offering low prices and pushing itself as a low-cost options trading platform. However, this option extends beyond currencies. The trading of stocks, ETFs, bonds, and mutual funds is possible with eOption. This implies that this would be a wise decision if you’re a trader who wants to transact in various markets.
However, if you want to be able to program some of your options, this might not be the answer for you. Users of eOption can create automated trading platforms without any programming experience. These choices are communicated to the client in the form of newsletters, and by reading the newsletters, they can choose that specific system by interacting with the automated trading desk.
If you want any manual trading options, you must have a different eOption account though. Once a particular automated trade is set up, it cannot be deviated from by any manual means.
A brokerage firm Interactive Brokers operates in 31 different nations and offers access to over 120 different markets. This is a good alternative for those who want to trade in markets other than forex.
Both inexperienced traders and seasoned investors can benefit from this platform. Users can find various educational resources to help them learn about and assist their trading experience for individuals new to the Forex market. The Brokers’ API solutions are a choice for the more seasoned trader.
Users can use programming languages like Java, Python, and C++ thanks to these API solutions.
Another choice is the capacity to carry out high-speed order routing. However, using the platform does not immediately get you access to this. The user will pay much more for this added service. This costs a minimum of $1,500 each month in commission fees.
SoFi Automated Investing
Because SoFi automatic investing uses one of the platforms with the lowest platform and trade execution fees, it is regarded as one of the best-automated forex trading programs.
Furthermore, SoFi permits trading outside the forex market, giving a trader wishing to enter several markets—including the cryptocurrency industry—another choice.
Parts of an Automatic Trading Strategy
Choosing an automatic trading strategy on your own takes some thought and skill. There are four main elements to a trading strategy. These include:
- Strategy logic
- Input and output signals
- Market conditions
Strategy logic is simply that… making sure there is logic to the implemented strategy itself and that you understand the strategy as well. It is also important to note when looking at strategies, that not all strategies or all aspects of a strategy will apply to all market conditions. Things to consider include:
- Objective benefits
- Stop losses
Input and output signals
Many traders worry about input and output signals and use this as a determining factor if a strategy is or is not successful. There is much more to this though. A strategy is a start for many potential operations to come…depending how you perform it can last in the hundreds or thousands of executions.
This means that you need to be able to distinguish between different signals and look at the operation as a whole rather than at the individual level. Looking at the whole could include making an average of executions out of an operation to see if it does or does not suit you.
If you have one poor execution but nine positive ones in the operation, it can still be considered successful due to that average.
As far as market conditions go, you should be watching for:
- Range markets
- Trend markets
This is a critical step to not forget.
Trend markets are at their cores, a trend…simple as that. A downward trend will have the lowest of lows and even the high points are still fairly low.
A range market is a condition that occurs when the trend does not go quite up or down. The price consolidates together and fluctuates between the upper and lower limits.
Now when implementing a strategy, this does not mean that either is good or bad, but rather you need to know which market condition your strategy is based upon.
Now, as far as automated traders go, they often expect far too much from the platform. They often believe that with an automated system it will outperform any other way of trading. This then leads them to use far too much leverage in trades…so when there is a loss, it is a larger dip than anticipated.
Traders need to be mindful that losses will occur. Focusing on only positives and potential gains will lead to that danger zone in using too much leverage.
When learning your automated strategy, it may be better to use less leverage while getting used to how the market operates. If you happen to take a loss with less leverage, this could then lead to having more capital to negotiate.
All in all, automated Forex trading software can help you as a trader take advantage of the market and make the gains you desire.
If you are looking for algorithms to add to your trading software, check over the Pearl Lemon Invest line of products…best suited for Metatrader 4.