Algorithmic Forex Trading

Algorithmic Forex trading is a logical result of combining

technical analysis with computer programs.

After all, if you always make the same trade under the

same circumstances so why not program the computer to

make the trades? In algorithmic Forex trading the computer follows the price of

one currency pair versus another.

It tracks any data that you want it to track and then makes trades under the

circumstances that you tell it to in the programming. Sounds like it should be

profitable, right? Certainly a lot of big trading houses use algorithmic Forex trading.

Should you? With profit from changes in foreign currency rates as our goal read more

about algorithmic Forex trading.

An Efficient Way to Trade Currencies

To the extent that algorithmic Forex trading always leads to profits it is a great idea. You

can simply pick the Forex pair, select the trading

program, and walk away. If the program is smart enough

perhaps you let it pick the currency pair.

If you tell the program when to start and when to stop and when to get out if there are problems algorithmic Forex trading takes fear and greed out of the picture and could

lead to nice profits.

To the degree that you keep it short and sweet, picking

the most profitable Forex pair and briefly trading it could

result in reliable profits. Now let us look at the dark side of

algorithmic Forex trading.

How Much Information Do You Need to Make a Profit?

One of the reasons that programmed trading is usually limited to large

trading houses is that you need a lot of information about a lot of things to routinely profit from

algorithmic Forex trading.

The business of picking a pair to trade can be simply one of technical analysis or it may require picking information out of the news for analysis.

Analyzing text in many languages takes the level of

difficulty up a couple of notches and puts this out of

the range of the average trader.

How Fast to Do You Have to Process Data to Avoid a

Disaster?

A really fast computer that is well programmed can make decisions and place trades in

tiny fractions of a second. Being in second place in this race to place trades can spell

the difference between success and failure.

Having staff on hand to make changes in computer code

can be invaluable and is not a service that is available to

the average trader. Speed is often of the essence when

reacting to market changes, which is the province of

algorithmic Forex trading.

This puts the average trader at a constant disadvantage if he or she chooses to compete on the basis of reaction time

or data processing ability.

What Are Your Options?

Despite our comments above about coming in second,

technical trading still works but so does sound

fundamental analysis. If you can see a change in the

market coming, you can buy Forex options, puts or calls,

on one currency using another.

This gives you the right to exercise the contract and

make a profit from your good judgment and forget about split second execution or

massive processing of data.