Automated Trading Systems

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Automated trading systems have become extremely popular with Forex traders. Before we dive into the basics of automated trading systems let’s define what it is. An automated trading system is trading software which will and exit points for trades. Not only will it select the entry and exit points it will execute trades on the trader’s behalf without the traders intervention.

There are those who like and those who dislike automated trading systems for a variety of reasons. Longer-term traders haven’t really found a good reason to use any type of automation as their entries and exits are relatively infrequent and can be entered manually quite easily. Short-term traders such as swing traders, daytraders, and Forex scalpers may find automating their trading strategies to their liking. If, for instance there is a trading strategy that enters and exits numerous times during the day, then in automated Forex system may be the correct choice for that type of trader.

Technology and automation are wonderful things when used correctly. They can certainly make the lives of the trader much, much easier and allow us all to trade more efficiently and effectively.

There’s a challenge with automation, however. It is really quite simple. An automated system is only as good as the system and automates. In other words automating a bad trading system will only allow you to lose money automatically and hands-free fashion. Although that statement is obvious, a surprising number of people still allow automated systems to trade their account without understanding how the system works.

One of the biggest dangers of automated trading systems is that these days they are very easy to produce. Their software available that allows you to create an automated trading system as well as back test that system. Unfortunately, many who venture out to create their own systems either for themselves or for sale to others have not learned how to properly evaluate a Forex trading system. Quite logically, not knowing how to evaluate a trading system doesn’t really leave you in a good position to create one that will work. With that said, it is important to learn to evaluate trading systems prior to creating your own.

If you are inclined created an automated trading system the first thing you’ll need to do is to learn how to create a robust trading system. That will, of course, include learning how to evaluate trading systems. By learning how to evaluate trading systems you will learn to create and choose those systems which are best suited for you.

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Learn Forex Trading

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To learn Forex trading is one of the smartest things a beginning Forex trader can do. Why? Because Forex education is key to successful Forex trading.

Many beginners start off with the idea that Forex trading is easy and that you don’t need to learn how to trade to be successful. Often times beginners beleive that all they have to do is to purchase a commercially available Forex trading robot. From there they can just sit back and let the money come in. This is a gross misconception.

While Forex trading is challenging, it is obviously not impossible. There are many who succesfully trade Forex. Those who do so have taken the time and put forth the effort to learn how to effectively trade Forex. Here are a number of way you can get the Forex education you need.

A Forex Trading Tutorial – A trading tutorial is a great way to start learning about trading. Typically a tutorial is designed to teach a specific skill or lesson. An example of a tutorial might be titled, “The Basics Of Price Action Trading”.

Forex Trading Books – Buying and reading a trading book is another excellent way to get started. There are many good Forex trading books available. If you are just starting out look for an introductory book that gives you an overview of the basics.

A Forex Trading Course – Taking a course can be both useful and convenient. Online Forex trading courses are available whcih allow you to progress at your own pace. This can be particularly convenient for those with a busy schedule.

Forex Seminars – This is a Forex course that is taught in a physical location such as the convention facilities of larger hotels. Seminars are a wonderful way to learn. Not only can you interact with your instructors, you can also interact with other seminar atendees.

Forex Training Videos – Forex video tutorials are a great way to learn. It makes sense that you can absorb trading information better when the info is presented in a visual fashion. Having someone show you how to trade in a step-bystep fashion is invaluable.

A Forex Practice Account – This would rate high as one of the best ways to learn about Forex trading. Essentially this is learning by doing.

With a practice account you can test your trading ideas and methods to see how they perform in real time. If an idea shows promise then you a basis for further analysis. If an idea does not show promise that is good as well because you won’t needlessly lose money when you move to a real money account.

The moral of the story is very simple: Learn Forex trading to trade successfully. The most successful traders in the world did not get to be that way by accident. They furthered their Forex education and prepared themselves to be effective in Forex trading.

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An Introduction to Forex Technical Analysis

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One of the most popular ways for individual Forex traders to analyze the Forex markets is using Forex technical analysis. Technical analysts work on the concept that as the market digests economic news, world events, and other data that it becomes reflected in the price.

Technical analysts use combinations of price, time, and or volume in their trading research.  This type of analysis has become increasingly popular especially with the ready availability of Forex market data and the increased processing capabilities of personal computers.

Often times in technical analysis Forex traders will start by looking at a Forex chart.  Forex charts allow traders to see how past prices relate to one another. This “perspective” allows traders to visually identify price trends.  The objective of looking at these price trends is to find patterns in price data that are likely to repeat themselves in the future.  If you can find price patterns with a good probability of repeating themselves, then you may have a good chance at developing a profitable Forex trading strategy based upon those patterns.

The use of charts in Forex technical analysis also allows for the use of technical indicators.  Indicators are named as such because they “indicate” when a price has met a particular criteria.  Technical indicators are shown on Forex charts right along with the price data.  They can come in the form of dots, dashes, lines, etc. all in the variety of different colors.

Here are some examples of some indicators commonly used in Forex technical analysis:

Moving average —  The moving average is probably one of the most commonly used Forex technical indicators.  Moving averages come in a variety of forms such as simple, weighted, and exponential.  In its simplest form a moving average simply take the last X number of prices add them together and then divides them by X. The average is called “moving” because it changes with time.  If we are looking at a daily moving average as an example the average will change with each new trading day.  Here’s a quick example of a simple 5 day moving average:

Day 1 = 1.41140
Day 2 = 1.40770
Day 3 = 1.40390
Day 4 = 1.39650
Day 5 = 1.38910
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Total  = 7.00860

7.00860/Number of Periods (Days) 5 = Moving Average = 1.40172

As you can see from this example in the prices from day 1 to day 5 were moving in a downward direction.  This means that the moving average line is also sloping downward.  We can see from our example that the price on day five is less than the moving average.  The typical interpretation of this is that the market is currently in a downtrend based upon this moving average.

Stochastic oscillator – While the moving average is typically used to measure the momentum of trends and the stochastic oscillator is typically used to indicate periods of trend exhaustion.  The values of the stochastic oscillator are between 0 and 100.

A Forex market is said to be in overbought (uptrend losing momentum) territory when the stochastic oscillator is above 80. A Forex market is said to be an oversold (downtrend losing momentum) territory when the stochastic is below 20.

With a basic introduction to Forex technical analysis you can instantly see how useful this can be in your own trading research.  Our moving average and stochastic oscillator examples are just that, and examples only.  In your own trading research you will want to experiment with a variety of parameters for these and other technical trading indicators as well.  It is been proven by successful traders the world over that technical analysis can be used to trade Forex very profitably.  Learning the ins and outs of technical analysis can definitely put you on the path to successful Forex trading.

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Automated Forex Trading Software

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Automated Forex trading software has become extremely popular these days. One reason for its growing popularity is the increasing number of short-term traders. Short-term traders love the set-it-and-forget-it nature of trading using this type of software.

So what is “automated forex trading software”? Automated forex trading software is software desgin to trade the Forex market in a hands-free fashion. This simply means that no action is needed on the part of the trader. Sounds like a dream come true doesn’t it? Well, yes and no. Let’s dig a little deeper into the pros and cons of trading using this type of software.

Pros –

1 – Trades without trader intervention. Can trade for you while you are plauing golf or on vacation
2 – Can react faster than a human can react. Software can take action faster than a human can.
3 – Can minimize frivolous trading. Trading software will trade in an unemotional fashion. It will do what is told to do when it it told to do it. This can be a big advantage for traders who have challenges exercising good trading discipline.

Cons –

1 – Typically has its logic hidden. This means that the user has no idea what makes the system tick. Any trading software with hidden logic is referred to as a “black box” system. If you don’t know the underlying logic of an automated system how can you tell if it is working as it should be working?
2 – Doesn’t encourage learning Forex trading and individual analysis. Automated software can actually make you a lazy trader. The exception to this is if you do your own research to create your own automated systems.
3 – Most commercially available Forex trading systems do not work. This is about the biggest “con” you can possibly think of. The good news is that you don’t have to rely upon someone else’s expertise (or lack thereof) to trade Forex successfully.

If I were to ask new traders what they think of automated software they would all tell me that its the greatest thing since sliced bread. If I were to ask those same traders if they were making money with their software it is likely most of them would tell me no. Why is that? One reason is that automation sounds sexy. If you tell a friend that you have your own personal “Forex trading robot” trading for you it is likely your friend will be impressed. It is almost as if automated trading carries a certain level of status with it.

So is automated Forex trading software good or bad? Neither. You see what really matters is if the trading system inside the software works or not. If the system does not work then we are only automatically manufacturing losing trades. Quite obviously, that is not our objective. In most types of trading automation isn’t really a necessity. If you do happen to venture into automated trading make certain you understand how the trading system works. It is also a good idea to trade the same system manually and compare results. This way you can ensure that the automation is executing trades as it should.

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The Basics of Forex Day Trading

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Forex day trading has become the rule rather than the exception these days. Many traders are looking to grab quick profits early in the trading session and go on with the rest of their day.

To day trade Forex you must simply open and close a trade all within the same day. If you ask why people would want to day trade Forex you would hear a variety of reasons.

Many traders feel that they can reduce their risk by not having trading positions open overnight. These traders feel that there is the potential that some event may take place which will have a negative affect on their trading position. If they close out all their trades by the end of the day then they can eliminate their exposure to overnight events or news of any kind.

The popularity of day trading and other short-term trading methods increased as real-time Forex data and faster, more efficient online trading platforms became available. Day trading has also grown to be a controversial topic. Many more conservative traders consider it to be nothing more than gambling while other claim that it’s the greatest thing since sliced bread. Whatever opinions people have about day trading there are traders who do it successfully.

Here are a few things to keep in mind if you are planning on day trading:

Transaction Costs – The transaction costs in Forex trading is the size of the spread. The spread is how your Forex broker gets paid. Quite logically, the smaller the spread the better it is for the trader. You may ask, “What does this have to with Forex day trading?”. Good question. Since day traders typically trade more frequently it stand to reason that their transactions cost will start to add up. Here’s a quick example:

Longer-Term Trader – – Spread = 3 pips X 6 trades per year = 18 pips per year transaction costs

Day Trader – – Spread = 3 pips X 150 trades per year = 450 pips per year transaction costs

If everything else is equal for the above 2 traders it’s easy to see that the day trader’s transaction costs are a much larger percentage of their profits.

The moral of the story here is that if you do day trade make certain that your Forex trading system will yield a profit AFTER all transactions costs.

Forex day trading can be incredibly profitable. As long as your trading method can make a profit after transaction cost over and over again you will be well on your way to being a successful Forex day trader.

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Forex Trading Strategies That Work

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Forex strategies that work are easier finding you might have ever imagined. The first thing you have to do is define what you mean by “work”. You can save a lot of time if you’re looking for the “holy Grail” of Forex such as a system that never has losing trades. The way can save a lot of time is to not look at all because no such system exists. Keep in mind that no one ever became rich in Forex trading by waiting around for the absolute “perfect” system. Now they were grounded in reality let’s discuss some real strategies.

Trend following strategies — Trend following is one of the easiest ways to profit in Forex trading. We use the term easy here loosely because the first thing we have to do before you can follow a trend is identify the trend. There are basically three different directions that th emarket can go, either up, down, or sideways. Trend followers look to profit in either up or down markets. We’ve all heard the saying “the trend is your friend”. This is the mantra that trend followers live by.

One simple method of trading with the trend is to trade using charts of multiple time frames. You can have your favorite indicator, such as moving average on each chart. For instance, you may have moving averages setup on each of a daily, 4 hour, and 15 minute charts. Assuming we are trading based upon the smallest timeframe to enter the trade we would go long when the price of the currency pair is above our moving averages on each of the three charts we mentioned. Using multiple time frames gives the trader the advantage of confirmation.

Our simple example above was done using moving averages, but the multiple time frame trading method can be done with indicators or without indicators. The multiple time frame strategy works great when used with breakout systems as well. This works well for entering both long and short positions.

When currency pairs are in a trading range, meaning that the prices are basically moving sideways you can profit using simple countertrend methods. A simple countertrend method would be to use support and resistance in the opposite way as may be used in breakout systems. In this case you would sell a currency pair when the price moved up to a resistance level and buy a currency pair when the price moves down to a support level.

Naturally, the above-mentioned examples of Forex trading strategies that work were for the purposes of illustration only and are not to be construed as an exact method to use. They are designed to give you a starting point for your own experimentation to find the right set of parameters for you.

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Learn Forex Trading Using Free Forex Trading Systems

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Can you really learn Forex trading using free Forex trading systems? The answer is yes you can. Just because a Forex trading system is being sold commercially does not mean that it works any better than free systems you may find available.

Most likely free Forex trading systems are just basic and most often used as examples of Forex trading systems. The fact that it is a simple and basic system makes an excellent trading system to learn from.

You can run a free Forex trading system on a demo account. This creates an outstanding learning environment for a beginning Forex trader. You can observe how the system performs through wide variety of varying market conditions. Just this type of observation itself can tell you a lot. If for instance, the system seems to do well in the up markets and down markets, but poorly in sideways markets, then you know the system follows the trend. This type of system is called a trend following system.

One nice thing about some free Forex trading systems is that they may actually be developed by experienced traders. Some experienced traders or more than happy to share their knowledge with those just starting out and make these systems freely available.

One important note here is that while it’s fine to learn to trade Forex using free Forex trading systems you don’t want to simply jump from freebie to freebie without building on your Forex education. Use such a system to learn more about trading entries, exits, and risk control.

When running free forex software in your demo account keep good records of the trades it makes and the conditions under which it makes those trades. Be sure to keep track of things such as the total net profit, maximum drawdown, profit factor, and other important system metrics. You can learn a lot about forex trading just by observing a trading system’s interaction with the market. From there you can seek to find the system’s weaknesses and minimize them and/or find the system’s strengths and maximize them.

A basic system can serve as a template from which you can build and create your own system. Creating your own profitable trading system be the objective of learning technical analysis and forex trading. Keep in mind that this is not a task to be taken lightly as it does involved a good deal of trading research as well as system development expertise.

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Forex Trading Tips for Beginners

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We have put together some Forex trading tips for beginners to help beginning traders get the right start in Forex trading.

Forex Trading Tips

Don’t Take Trading Advice from People Who Don’t Trade – This tip should be obvious, but you would be surprised how many people are actually giving out trading advice without ever having traded themselves. If you’re looking for a Forex trading mentor that you’ll need to find someone who actually trades successfully. Why? Simple. Because you want to duplicate the success of the trader wo is profitable rather than duplicate the failure of a trader who is not.

Never Stop Learning – The Forex markets are changing constantly. Along with these changes is the ever-increasing pace of financial market technology. Successful traders already know the benefits of continuing education in their industry.

Learn to Be Patient and Don’t Be in a Rush to Make Your Fortune in Forex Trading – When you are just starting out your level of enthusiasm and anxiousness to get into the Forex markets is almost overwhelming. This level of enthusiasm is actually one it can be a positive rather than the negative. Channel your energies and enthusiasm into learning how to trade effectively. By being patient at the start of Forex trading, many traders have realized that they would’ve made many foolish and expensive mistakes had they rushed in unprepared.

Develop Your Own Forex Trading Strategy -With so many strategies available for you either for purchase or for lease, the best possible trading strategy will be one that suits you to a T. You can get started with something that is simple, yet effective such as a channel breakout strategy. From there, you should do your own trading research to test your strategy and make certain it is one you are comfortable trading.

Learning to do your own trading research is an important part of becoming a profitable trader. Many will not go through the time and effort to learn technical analysis and trading systems development. Personally testing and tracking to see what works and what does not work gives you a tremendous edge.

Realize That Losing Trades Are a Natural Part of Successful Trading – It is very common for beginning traders to try their very best to avoid having any losing trades at all. This journey seeking, “trading perfection” has left many would be excellent traders in a state of paralysis by analysis. As a result of this many of those who are just starting out find themselves in the perpetual quest for the, “Holy Grail” of trading.

Make certain that you keep in mind that the most successful traders in the world have losing trades. Also bear in mind that your trading system does not have to have a high percentage of winning trades in order to be extremely profitable and effective. In fact, you may not know this, but there are trading systems that have 50% winners and are very, very profitable.

What we just covered are few Forex trading tips for beginners that you should keep in mind as you continue along your Forex trading journey.

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Forex Charting Software

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Hello and welcome to another Forex Examiner Forex trading tutorial.

In this Forex trading tutorial we are going to cover Forex charting software. Forex charting software is one of the most basic types of Forex trading software. It may also be referred to as Forex signal software if there are signals generated by the software when certain chart criteria are met.

Now many people who are just starting out may look for free Forex charting software. Well there is good news, I’m going to show you where you can pick that up at absolutely no cost to you. Also those of you who use a Mac computer may be interested to know that their are some charting software options available for you.

So what we are going to do now is to pop over to some Forex charting software sites.

The first we want to take a look at is the MetaTrader website. It is located at www.metaquotes.net

Here you can download either MetaTrader 4 which is been a standard in Forex charting software for some time. You can also find the newer MetaTrader 5 which also allows you to chart financial instruments other than Forex such as stocks and futures. You can download them directly from the website at the web address given above. MetaTrader is one of the most widely used of Forex charting packages.

While MetaTrader is frequently used as the “entry level’ charting package for most it can be very powerful in the hands of a skilled trader. In general, MetaTrader is a good way for you to start out and set up a demo account and start to test your trading ideas.

Ninja Trader has been around for quite some time, since 2003. There’s been nothing but praise for the way that Ninja Trader runs their business and for their charting packages. To find our more hop over to their website at www.ninjatrader.com and have a closer look at what Ninja Trader has to offer.

Tradestation is a very powerful chart, analysis, and trading platform. It can do everything from automated trading to manual trading to back testing systems and much, much more. It is one of the most powerful packages out there and is used by many experienced and professional traders. To find out more about TradeStation you can go to www.tradestation.com and take a look around the website to find out if this might be the right type of charting package for you.

XTick is interesting because of the Mac computer compatible option for trading and charting. You can go to www.xtick.com to find out more about their software.

MutiCharts has been around for quite some time and it has won numerous types of awards. You can visit the website at www.multicharts.com and take a look at what MutiCharts has to offer.

Esignal has been around for a very, very very long time. They have very in depth experience in the creation of trading tools for successful traders. You can find out more at www.esignal.com.

Now these are just some of the available packages and it’s a good idea to go through them and compare the features to the features you will need. They can vary greatly in their capabilities such as which brokers they can inerface with, etc. That is very important too because many people these days are interested in software which allows automated Forex trading with ther favorite Forex broker. In addition, some charting software allows traders go to a chart and place trades based upon entry and exit points placed upon the charts.

Trading technology is getting more sophisticated and flexible as time goes on. It makes sense, of course, to check out the various types of Forex charting software as well as check out some Forex charting software reviews. Hopefully you be able to find some that are unbiased from people who actually use the software. These are typically the traders who are be able to tell you the best software for their needs and that might mirror the software you need for your Forex trading as well.

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Forex Trading For Beginners

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Let’s cover some easy Forex trading for beginners. Although I know there are many beginners who are starting out who like to trade in the shorter time frames, trading on a longer time frame gives you more time to react. With a longer time frame you don’t have to be that nimble and quick as a more experienced trader.

If you’re just starting out in Forex trading you are most likely very anxious to get started. At this point, of course, it makes perfect sense for you to learn to trade Forex properly prior to investing your capital. This Forex trading for beginners video is designed to give you an introduction to some of the easy Forex strategies for beginners. Watch the video and use it as a reference guide and look for similar patterns on your own charts. What you’ll find is that many price patterns in Forex repeat themselves again and again and again. This is not to say that those price patterns will always lead to positive trades. There is always be profit potential in finding those price patterns which have the highest probability of future success.

In the video above pay particularly close attention to the discussion of risk levels. The level of risk you take will depend on a number of factors such as your account size and your trading system. Keeping your risk/reward ratio under control will not only help you preserve your capital for future trading opportunities, but will allow a profitable Forex system to flourish. Controlling your risk is a standard practice among successful traders, whereas not controlling risk is the most standard practice among non-successful traders.

In our example Forex tutorial video we are exploring a simple channel breakout system using the EURUSD daily chart. The channel breakout system can be highly effective when used on different currency pairs as well as different time frames. So as you gain more experience and advance from a beginner to an intermediate Forex trader, you may wish to look at using a simple channel breakout strategy for shorter term trading.

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