Online Automated Forex trading Is Catching On
Online Automated Forex trading has increased trade volumes in recent years and many of the users are individual traders. The concept of automated Forex trading is fast catching on.
The first market to move to online automated trading was exchange-traded futures. Traders working in the interbank spot FX market followed afterwards and moved on to this system.
The success of the system flows from its ability to conduct trades in real time. This is difficult to achieve manually, especially if the trading is to be done in milliseconds.
There may also be times, when a trader may be away from the desk, or the trader who has incurred a series of losses may take time before placing a fresh order. These are dampers that online automated Forex trading removes.
Another advantage that automated trading brings in is diversification. It is possible for a trader to trade in different markets, and in different time zones. The trader can also deploy multiple trading models.
The trader can also use the automated model to analyze short-term data, which is not possible otherwise. This gives the trader an advantage over others who are not using the automated trading system.
The trader can use this short-term data to analyze how the market will move in the next 15 minutes or half an hour, and accordingly make decisions. And with high frequency trading you can use existing data to apply in different ways to different markets.
One benefit of automated trading is it improves liquidity. This was evident from the way the number of trades shot up in futures exchanges following the adoption of automated trading.
However, the ability for technology to keep up with demand is one area that worries traders, because as more traders adopt this system, the likely increase in the number of orders will increase thus giving reasons for concerns that there may not be sufficient bandwidth or engine capacity to execute all these orders in real time. This is being addressed by some quarters employing controls to guard against unnecessary order messages.
Online automated Forex trading brings on another area for concern for many traders, and that of Risk management. This concern is due to a risk management logic, which requires that when using an automated trading environment, before a new position is opened a check be made to ensure that there is no excessive correlation with already opened positions.
For this check to be accurate, all systems need to be working synchronized, and these are technical issues that need to be resolved. But overall the market feels as technology improves these concerns will be resolved.