This is a guest post by Jane Sanders
Forex trading is a fast paced, complex, high risk, high reward activity. Good split second decision making can be the difference between riches or ruin on the forex markets. That’s why so many forex traders use computer programs to make forex trading decisions. Many forex traders make consistent profits using computer programs designed to help make forex trading decisions. Don’t quite understand how a forex trading computer program can make decisions for you? Read on.
The Forex Market
The forex market is the largest and most liquid market in the world, and is open from twenty-four hours a day from Sunday evening through Friday night. Trading volume is very high, with an average daily turnover of just under $4 trillion. The forex market reacts very quickly and almost continuously to new information. Trends develop quickly and can be very profitable.
How Computer Programs Fit In
Since being able to pick up on trends and make split second decisions in this very competitive market can be very profitable, many traders make use of computer programs that are able to process a large amount of information continuously and quickly. These programs identify developing trends and trading opportunities with complex algorithms that can decide the timing, price, and quantity of an order. In many cases, these programs can execute automated trades with no human intervention needed. This is known as algorithmic trading.
Computer programs designed for algorithmic trading analyze currency price charts and other market activity, and identify signals such as price trends and news that may affect the market. There programs can then employ many different known trading strategies, such as trend following, arbitrage, mean reversion, and inter-market spreading, to name a few, triggered by indicators of resistance or support levels or potential topside or bottom breakthroughs.
Don’t know what any of these strategies are? Don’t worry. The only criteria that you will have to provide most forex trading computer programs is how much risk you are willing to take and how much profit you want to make. The program can then use pre-defined parameters to identify trading opportunities that fit your criteria of risk and reward, and execute those trades for you after broadcasting to you a buy or sell alert. For more experienced forex traders, the parameters the program uses to find trades can be tweaked to create any kind of strategy imagined.
Using a computer program to make trading decisions can keep a trader from making erroneous decisions because of psychology. Even experienced traders may make mistakes because of psychological or emotional triggers. With automated trading, these kinds of human lapses in judgment do not occur. Just one more benefit of using computer programs for making forex trading decisions.