How has automation changed Forex trading?

by / ⠀Personal Finance / August 16, 2020
How has automation changed Forex trading?
Photo by Burak K from Pexels
Forex trading, which implies the exchange of currencies, has been around for a long time, but it doesn’t date back to the Babylonian period, as many wrongly assume. Alex. Brown & Sons first traded foreign currencies in 1850. At present, the foreign exchange market is the largest and most liquid market worldwide. The environment is dynamic and traders do their best to get through by staying above their competitors. Throughout time, we’ve witnessed important events greatly impacting the Forex trading environment. Internet trading is one of them. Beginning in the 1990s, currency markets started to become more sophisticated.  The way people viewed and used money suffered drastic changes. With the simple click of a button, a person can get all the necessary info for making transactions and place buy or sell orders. 

The revolution of automated trading and trading robots 

These days, you can even have robots trading on your behalf and make guaranteed profits. Automated trading is an ingenious way of participating in the foreign exchange market by deploying a program that executes trades based on pre-set rules. The only thing the trader has to do is combine technical analysis with setting parameters for position sizing. The vast majority of trades carried out on platforms such as MT4 are performed by automated programs.  Automation enjoys a dominant presence in the Forex industry and beyond. For instance, robots are starting to replace workers and job titles are changing so as to reflect the impact of technology. Automation can be considered a phenomenon. If you manage to find a strategy that works, you can transform it into a robot. Getting back on topic, automation is highly relevant to the Forex industry. You don’t have to spend all your time in front of the computer. Actually, you can go on a short trip without having to worry about your trading account.  Forex robots can carry out various automated trading functions, such as telling you when it’s the right time to trade and placing and managing trades on your behalf. MetaTrader and other applications work around the clock on a set of predetermined triggers for action. It’s not hard to understand the appeal of installing a program to execute trades on your behalf. If you want to copy the trades of experienced Forex brokers, you set up the program and it will automatically copy the positions opened and managed by the individuals of your choice. It’s as simple as that. At the end of the day, you get the best performance for your funds.  The best thing about automated trading is that it eliminates emotion from the process. There can be various powerful emotions that influence your actions, such as greed, fear, exuberance, and so on. By letting a trade be run by a robot, you give it the chance of not losing. It can make decisions without any emotions at all. The robot monitors the financial markets for trading opportunities and executes the trades. If there happens to be a risk of failure, the computer program will ask for your approval before making a move. Auto trading systems are great, yet they don’t guarantee 100% profits.  While it may not be flawless, an automated trading system can prevent significant losses when buying and selling currency. This is explained by the fact that the computer immediately places a stop-loss order, which is meant to protect the investment. The robot is programmed by the individual, which means it merely assists the Forex trader to benefit from any movement that the market makes. In plain English, the trader is in charge. 
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What does automation mean for Forex brokerages? 

The Forex industry counts numerous brokerage companies, so the competition is fierce, so as to say. Brokerages must identify new ways to create value and attract customers if they wish to raise their market share. This translates into keeping traders happy and loyal to the brand, which is anything but easy given that customers are more pretentious. Making the transition towards automation is one way of becoming competitive. If an investment bank like JP Morgan, which is the largest Forex dealer in terms of global volume, has made big steps towards automation, the rest should follow in their footsteps.  The growing use of automation seems to be generally positive for Forex brokerages. Automation reduces costs in the long run, but brokers need to be willing to make a significant investment to take advantage of such perks. The FX ecosystem is highly modernized and the case for automation has been clear for some time. Automation can eliminate dealing desks, eventually saving time and money. The elimination of the intermediary is the reason why currency trading has grown so much over the past years. With an automated procedure in place, everything will be taken care of by the system. For the time being, firms won’t give up dealing desks, partly because they don’t enjoy making changes.  All in all, automation won’t lead to the death of brokerage companies. There will be one or two changes in the structure of Forex brokerages, but that’s about it. Automation doesn’t wipe out jobs; it simply deals with high-volume, routine tasks. Not everything needs to be done by hand. Robots are changing the industry for the better, but they do need some supervision. To customize the trading experience, firms can consider building a platform from scratch. This allows them to code their algorithms from the ground up and make sure they get the best execution.  Forex brokerages will want an automated, end-to-end process that covers the execution of trades and uploads the results to the other internal systems. And they will want expert advisors to assist clients in assessing trending market movements, in addition to carrying out the trading process. Robots are the next-generation technology that everyone wants to have.  What used to be an option is now a necessity for far-reaching businesses. Given the continuous advancements of cutting-edge technologies like artificial intelligence and machine learning, the Forex industry will undoubtedly grow. The few brokers that aren’t automated should think about making a change.

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About The Author

Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders. MBA from Graduate School of Business. Former tech startup founder. Regular speaker at entrepreneurship conferences and events.

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