With the continuous development in the field of information technology, the span of skills that artificial intelligence exhibit keeps on expanding wider and wider. Now, with the mode on trading foreign currency through the Internet becoming the main means of trading, artificial intelligence has now penetrated this field with automated forex trading. Forex autotrading, as some may also call it, is a trading strategy where buying or selling of a pair of currencies is automated by using a program whose functions are designed based on certain trading strategies. Usually, a forex trading program would do its buying or selling when certain preset criteria are met by the conditions of the market. This means of trading in the foreign exchange market is usually used by traders who have a significantly higher rate of trading and volume compared to the average trader.
The trading strategy used by one automated forex trading program will vary from that of another. The variety of strategies being used can vary as much as the variations between trading styles of real people have. The variation is usually caused by the programmer who designed the software. Depending on his preference, research, or beliefs, the programmer may include or omit certain indicators in the market, all of which could guide the program in deciding whether to buy or sell a pair of currencies at a certain point. Despite the wide variability, the inclination of the programs is always toward technical analysis, which is the use of mathematical indicators in deciding the move of a certain trader in the market. So, if you are more inclined to side with the fundamental analysis techniques, using forex autotrading may not be the option for you. This is because usually, once you have given the software control over your trading accounts, chances are likely that the program might have already made its move before you have decided to interfere.
If you still want to have control over you account, it is recommended that you find a forex autotrading program that will need your approval first before making its move. Although the disadvantage of this is that you may lag behind the trend if you missed out on approving the move at a critical point in the trend. All in all, the greatest advantage that automated forex trading programs can do for you is that it can do both the trading and analysis for you while you sleep on your money.
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How You Can Make Your Automated Forex Trading System Work for You
Forex is one of the hardest markets to earn a positive return on investment in the world, but that does not mean that you can find success in this unique market. Forex strategies are commonly found all over the Internet, on various forums, blogs, and chat rooms. However, it is well-known that publicized automated Forex trading systems are typically used and abused until the point of no return. Eventually, they will become the general knowledge of the market and no one will be able to make a profit with a particular strategy.
To make automated Forex trading systems work for you, there are a few things to keep in mind. The very first, and arguably the most controversial, is to keep your Forex strategies to yourself. Don't talk to anyone! Sure, you might have some friends that you like to swap stories and collaborate on strategies with, but if you find a particular strategy that works extremely well for you, your best security measure is to shut your mouth. Don't say a word. Money can do funny things even to the best of friends, so telling your friend a profitable strategy might lead to him either scaling and profiting, or selling it and profiting. You want neither of these options to happen, and the only way to ensure that is to keep it quiet.
Once you find a strategy that is working for you and you kept it quiet, the next thing you should do is constantly refine and tune your strategy. No strategy is perfect on the first go around, and many of them can be significantly improved over many iterations. The beauty of Forex and automated trading is that you have many situations and instances where you can refine the system. Even if refining your system means only earning a couple extra pips per day, it's worth it. Those pips can add up to huge sums of money in the long run, provided your strategy works over the course of weeks, months, or even years.
Another critical tip to maintaining the health and profitability of your automated trading system is to control your emotions. If you know without a doubt that your system is profitable, you should not be worried about down days or unlucky stretches of time. Deep down in your heart you'll know that it is just an unlucky streak and you will climb out of it sooner or later. The last thing you want to do is ditch your entire trading system because your emotions have gotten out of control.
To make automated Forex trading systems work for you, there are a few things to keep in mind. The very first, and arguably the most controversial, is to keep your Forex strategies to yourself. Don't talk to anyone! Sure, you might have some friends that you like to swap stories and collaborate on strategies with, but if you find a particular strategy that works extremely well for you, your best security measure is to shut your mouth. Don't say a word. Money can do funny things even to the best of friends, so telling your friend a profitable strategy might lead to him either scaling and profiting, or selling it and profiting. You want neither of these options to happen, and the only way to ensure that is to keep it quiet.
Once you find a strategy that is working for you and you kept it quiet, the next thing you should do is constantly refine and tune your strategy. No strategy is perfect on the first go around, and many of them can be significantly improved over many iterations. The beauty of Forex and automated trading is that you have many situations and instances where you can refine the system. Even if refining your system means only earning a couple extra pips per day, it's worth it. Those pips can add up to huge sums of money in the long run, provided your strategy works over the course of weeks, months, or even years.
Another critical tip to maintaining the health and profitability of your automated trading system is to control your emotions. If you know without a doubt that your system is profitable, you should not be worried about down days or unlucky stretches of time. Deep down in your heart you'll know that it is just an unlucky streak and you will climb out of it sooner or later. The last thing you want to do is ditch your entire trading system because your emotions have gotten out of control.
5 Simple Rules For Successful Forex Trading Strategy
If you are ready for a change of path and life, forex is the way. Forex market now trades as of vicinity of 3 trillion dollars daily. Three trillion is a lot of money more than any other market, including the stock market. With this kind of liquidity comes a lot of volatility and that's where the profit is made. To make money with FOREX we need the price to move rapidly and in trends. Forex provides plenty of opportunities to do that.
Like any good Forex trading strategy your strategy should be based on sound money management.
The first real lesson I learned about Forex is that money management is the most important part of a successful forex trading system. You need to really understand that. Tell yourself that every day if you have to manage your money properly and you will be a successful Forex trader.
5 Simple Rules to Successful Forex Trading
Rule 1: Never enter a single position larger than 1% of your account size. I calculate 1% as the total amount of my open position at 100 pips. So for instance, assuming I'm using 100:1 leverage and I have an account balance of $10,000.
$10,000 / 1% = $100. I can open one 10K position. At 100 pips, this position will equal 1% of my total account balance.
Rule 2: Only close losing positions when your total drawdown is over 12%
So if you have an account balance of $10,000 you would not close any losing positions unless your total drawdown is $1200 or greater.
I enter all my trades without setting a stop loss. That's where the next rule comes in.
Rule 3: Buy low, Sell high
This is where long term analysis comes in. Look at your charts on a daily, weekly and monthly time frame. Look for major levels of resistance and support.
NEVER go long (BUY) near a daily, weekly or monthly high.
NEVER go short (SELL) near a daily, weekly, or monthly low.
SELL if price approaches a daily, weekly or monthly high.
BUY if price approaches a daily, weekly or monthly low.
I'm not talking about only trading on daily or weekly charts. I just want you to be clear that when dealing with really major levels of support and resistance you never want to trade against them.
That is one of the key elements of this forex trading strategy.
Rule 4: Hedge when necessary using high correlation pairs.
Hedging is simply a way of managing your risk. By opening a trade on a different currency pair that moves in a similar (or opposite) fashion to the pair you're currently trading you can manage your risk.
Rule 5: Take Profit When YOU Want
Remember, we are not using any stop losses. We can however use limits (take profits). I generally set my limit at around 50 pips.
I aim for 50 pips each and every day!
If I make 100 pips in a day, I will close the trading account for the remainder of the day and take a break. Remember, 100 pips is equal to 1% of your TOTAL account balance assuming you're risking 1% of your account for each position.
If you can make even 50 pips a day that's over 20% a month!
On a $10,000 account that's $2000/month consistent profits, only risking 1% in each single trade. And that's without compounding!
Patience is key
I've had positions against me over 2000 pips! While those positions were losing, I was hedging and making profits.
Sure enough, weeks or months later those same positions that were over 2000 pips against me came back. Because I had patience I was able to close those trades for a profit.
So don't panic if a position goes against you. See if there is a possibility to hedge. If there is, great. If there isn't, wait it out.
You can still make other trades while you're waiting. That's the beauty of only risking 1% per trade.
Like any good Forex trading strategy your strategy should be based on sound money management.
The first real lesson I learned about Forex is that money management is the most important part of a successful forex trading system. You need to really understand that. Tell yourself that every day if you have to manage your money properly and you will be a successful Forex trader.
5 Simple Rules to Successful Forex Trading
Rule 1: Never enter a single position larger than 1% of your account size. I calculate 1% as the total amount of my open position at 100 pips. So for instance, assuming I'm using 100:1 leverage and I have an account balance of $10,000.
$10,000 / 1% = $100. I can open one 10K position. At 100 pips, this position will equal 1% of my total account balance.
Rule 2: Only close losing positions when your total drawdown is over 12%
So if you have an account balance of $10,000 you would not close any losing positions unless your total drawdown is $1200 or greater.
I enter all my trades without setting a stop loss. That's where the next rule comes in.
Rule 3: Buy low, Sell high
This is where long term analysis comes in. Look at your charts on a daily, weekly and monthly time frame. Look for major levels of resistance and support.
NEVER go long (BUY) near a daily, weekly or monthly high.
NEVER go short (SELL) near a daily, weekly, or monthly low.
SELL if price approaches a daily, weekly or monthly high.
BUY if price approaches a daily, weekly or monthly low.
I'm not talking about only trading on daily or weekly charts. I just want you to be clear that when dealing with really major levels of support and resistance you never want to trade against them.
That is one of the key elements of this forex trading strategy.
Rule 4: Hedge when necessary using high correlation pairs.
Hedging is simply a way of managing your risk. By opening a trade on a different currency pair that moves in a similar (or opposite) fashion to the pair you're currently trading you can manage your risk.
Rule 5: Take Profit When YOU Want
Remember, we are not using any stop losses. We can however use limits (take profits). I generally set my limit at around 50 pips.
I aim for 50 pips each and every day!
If I make 100 pips in a day, I will close the trading account for the remainder of the day and take a break. Remember, 100 pips is equal to 1% of your TOTAL account balance assuming you're risking 1% of your account for each position.
If you can make even 50 pips a day that's over 20% a month!
On a $10,000 account that's $2000/month consistent profits, only risking 1% in each single trade. And that's without compounding!
Patience is key
I've had positions against me over 2000 pips! While those positions were losing, I was hedging and making profits.
Sure enough, weeks or months later those same positions that were over 2000 pips against me came back. Because I had patience I was able to close those trades for a profit.
So don't panic if a position goes against you. See if there is a possibility to hedge. If there is, great. If there isn't, wait it out.
You can still make other trades while you're waiting. That's the beauty of only risking 1% per trade.
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