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Forex Currency Trading - How to Harness Today's Trading Technology
Self control and discipline can be nurtured and strengthened over time
and are extremely valuable qualities to develop. In this article we'll
talk about how these qualities relate to current and projected future
developments in the Forex industry.
Manual Forex trading is a time-tested and market proven method for
trading Forex. There is no doubt that manual Forex trading is here to
stay. Many of the most skilled full-time Forex traders prefer this
method. The key words here are skilled full-time traders.
You see, manual Forex trading can be time consuming. While the process
of Forex technical analysis gets a bit easier and more efficient with
practice in manual Forex trading it can never be completely
eliminated. Manual Forex traders will always need to complete their
technical and perhaps even fundamental analysis prior to executing
their Forex trades.
As you know, fundamental Forex analysis has to do with looking at
economic indicators within and between nations. Fundamental Forex
indicators such as Consumer Price Index, Non-Farm Payroll, Gross
National Product, Industrial Production, Producer Price Index, Retail
Sales, Balance of Payments and Interest Rates are many of the most
common fundamental Forex indicators traders seek to incorporate in
Needless to say using both fundamental and technical analysis is quite
complex and can be a very time consuming challenge. Except for "news"
traders many Forex traders default to primarily using Forex technical
A prime example of "news" is the Non Farm Payroll announcement. This
announcement normally takes place on the first Friday of each month at
8:30am Eastern Time. Forex traders who trade the news position
themselves in the market to capture as many PIP's as possible during
the market corrections that take place just after a "news" release.
Forex traders who trade the news rely quite a bit on fundamental
indicators in making their trade decisions.
New Forex software programs that gather and interpret Forex
fundamental indicators have been around for a while and they will
continue to improve their accuracy with time.
Speaking of Forex software programs, one of the most rapidly
developing forms of Forex software are "Expert Advisors". Forex Expert
Advisors (EA's for short) are software programs that operate within
your Forex trading platform. So far, the industry leading Forex
trading platform for EA's is the Metatrader 4 Trading Platform
designed by ODL Securities.
There are several advantages to using an EA. Perhaps chief among these
advantages is the fact that the "on-board" programming of the EA
eliminates the need for the Forex trader to spend a lot of time doing
technical analysis. Once an EA is properly initiated, it will
automatically trade a specified Forex pair, or pairs, using a
predetermined strategy or Forex trading approach.
This can be a huge time-saver.
With an EA the Forex technical analysis is handled by the Forex
trading logic programmed into the EA. The EA functions off of a set of
predetermined "rules" which guide its operation. The EA enters the
Forex trade when the entry conditions are met and exits the Forex
trade when the exit conditions are met. Each EA has a different set of
predetermined rules. Each rule is typically controlled by one or more
user adjustable "switches". These switches are optimized at the time
the EA is delivered to the user and can be saved as a switch settings
profile. Once the default switch settings are saved, the user can make
changes to the switch settings if they wish. It is important to
remember that the best way to determine EA switch settings is through
the back testing process.
Back testing is a process by which each switch or set of switches are
methodically tested using actual past market data from your Forex
trading platform. While back testing takes much less time than forward
testing it is still a painstaking and time consuming process but the
results can be very revealing and informative. This process will tell
you such things as, for example, which time frame(s) and currency pair
(s) are the most profitable to trade.
Back testing is absolutely necessary in order to optimize the settings
for an EA and as such it is very valuable process but the process is
not perfect. Data mismatches can occur during the back test process
which can degrade the results somewhat. The source of these data
mismatches is not known at this time but it is an industry wide
problem and the solution to the mismatch problem is being vigorously
Even with its flaws the back test process remains of utmost importance
when it comes to optimizing the performance of any EA.
The time saving nature of using an EA coupled with the stress reducing
effect that it has on the Forex trader has boosted the popularity of
this kind of Forex trade automation.
It is just this kind of Forex trade automation that is helping to fuel
the explosive growth of the retail Forex market. It is no longer
necessary to stay glued to your computer monitor and "baby sit" your
Forex trades. Not only that but a properly designed EA can perform
functions that even the most skilled and experienced Forex traders
find difficult. For example, there are EA's on the market today that
can trade multiple currency pairs simultaneously. Other EA's can trade
multiple Forex hedge trades at the same time!
We are in the midst of a quiet revolution toward increased Forex trade
automation. It is safe to say that the trend toward Forex trade
atomization is likely to continue and strengthen over the next several
years. Because the advantages of using an EA outweigh the
disadvantages, the popularity of using EA's is at an all time high and
likely to set new records in the near future.
Even though EA's are reducing the need for Forex technical analysis
they are not reducing the importance of self-control and discipline.
It is common for Forex traders who are new to EA trading to have an
urge to "manual" trade using the EA. This is a mistake, first of all
it defeats the purpose of the EA and second it can result in
With EA trading the EA is your Forex trading method. The EA trader is
well advised to allow the EA to do its work without trying to manually
over-ride it (Plan your trade - trade your plan).
If possible, examine the back testing and forward testing results of
an EA before you purchase it. Always demo trade with a new EA to
confirm its operation before using it in a live account.
EA trading is gaining in popularity by leaps and bounds. EA trading is
part of a major trend toward increased automation in the world of
Forex. This trend is expected to expand and strengthen in the years
Being skilled in Forex technical analysis is always an asset but EA
trading relies more on the Forex trading logic of the EA than it does
the technical skill of the trader.
Self control and discipline are equally important whether you are
Forex manual trading or EA trading. Combine the personal qualities
self control and discipline with using a well designed EA and you are
on your way to profiting in Forex - the world's largest market.
Disclaimer - This article is for educational purposes only. It is not
offered as investment or legal advice. The reader assumes all
responsibility for any and all profits or losses incurred by his or
her trading activities.
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