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How to Create an Automated Forex Trading System

Will Ellis

Last Updated on January 1, 2023

The idea of entering any sort of market might sound very enticing to many people.

At the same time, it might sound very terrifying too. It might sound overwhelming and like too much for one person to handle on their own. Entering any sort of market and putting your money into it is daunting, and the risks of losing your funds is so scary that some people don’t even attempt.

But you should. In fact, all people should have knowledge of and experience with investing. And everyone should not be afraid of the massive amount of information out there and the steep learning curve that comes with investing.

Table of Contents:

Welcome To The Currency Market
What is a Forex Trading System
How To Create Your Own
Why Use Automated Trading

Welcome To The Currency Market 🤑️

If you are planning to put your money into a marketplace, then the currency market would be a very good one to start with. So many people don’t know it but you can actually invest in, trade, and make money off of international currencies.

Much like how you can buy and trade the stocks of the companies you believe in, you can also buy and trade the currencies of countries.

An exchange of foreign currency is called “forex” and it is a booming industry that holds many advantages and benefits to those who invest. When you invest in forex, you are going to find a sort of currency that you want to pair your own with.

When you pair your currency, you are using the money you own to buy and hold a currency that you don’t. It’s as simple as that. From the yen to the ruble to the dollar and beyond, there are so many currencies that you can buy, hold, and then trade for a profit.

But if you are doing this, you should use an automated forex trading system. Why? Because it takes out so many of the challenges that often get in the way of making money when investing in forex.

What is a Forex Trading System? 💱️

In its most basic form, a forex trading system is a program made of guidelines used to carry out trades with one or even more currency pairs.

Although these strategies can be applied directly, many traders choose to employ automated systems, which are focused on software code, to eliminate emotions from the process and carry out trades faster and automatically.

These automated systems may watch the markets at whatever time of a day that is requested, seeking the opportunities and placing trades in accordance with predetermined scripts. They can be thought of as custom robots that are designed to carry out the trader’s wishes.

How To Create Your Own 🔎️

The biggest advantage of creating a customised automated trading program is that there are virtually no restrictions: these systems are only limited by your creativity and by what can be programmed.

However, creating a custom system will need some serious knowledge of trading, money markets, and advanced analytics. A programmer can be hired once you have the program designed, but you will still need to translate the framework into code.

Creating A Plan

A thorough trading plan, which serves as a framework for the financial transactions and can assist you in determining your objectives and the ways in which your automated program will support those goals, is a smart idea if you want to get the most out of your time spent in the marketplace.

After deciding what you wish your platform to accomplish, the following stage is to figure out how to execute it.

What Will Your System Do?

It’s crucial to think about your software’s ability to recognize investment opportunities, as well as what you wish it to do when it does. It might carry out operations for you, or just notify you when an opportunity you have been waiting for pops up.

Consider the methods and indications you often use to spot patterns and how you choose to perform transactions as you construct your program.

Study The Market

Remember that instead of quantitative research, the majority of automated trading programs are focused on technical indicators. Therefore, it’s crucial to have a solid understanding of this subject and how it might influence your performance.

The process of converting your program’s concept into code shortly follows. You must develop your strategy for the particular system you intend to use because every platform employs a distinct programming language.

While having a basic understanding of what can be programmed is helpful, having in-depth coding experience is not completely essential.

You Can Hire Help

In fact, you could always hire a programmer to make your platform for you. Many people do take this path because they are able to rest assured that their program will do what they want, when they want. However, this option will certainly cost you most because programmers are not cheap.

Verify Your System

The last stage is to verify your trading system using past data and tweak it until you achieve the statistics you want. This is basically kicking the tires of your platform, lifting the hood, seeing how it works and if it works as planned. This is an essential step because it will make sure that the program will work beyond just theory.

Yes, regardless of whether you decide to buy a conventional system or design your own, this is a crucial phase since it will offer you a good indication of the system’s effectiveness while actually not putting your funds in danger.

Even if backtesting is a great tool for gauging the efficiency of the platform you have chosen, it has several drawbacks.

Static data may not necessarily be indicative of what would occur in a real market environment because it may not compensate for variables like volatility.

Time To Get It Working

It’s now time to put your technology into practice after you’ve configured and optimised it. Automation does not, unfortunately, imply that you should simply get up from your desktop.

The finest automated trading algorithms might experience glitches or weird behavior, so it’s important to continually keep a watch on what occurs in these situations.

Additionally, as computers typically make choices solely because of technical indicators, they might not be prepared to assess the implications of economic developments or other current events, political considerations, and economic conditions, which human traders might take into account as a component of their financial accounting.

Why Use Automated Trading? ➡️

Now that you have seen how you can set up your own automated trading system, you should probably answer a very important question: should you even use one?

There are plenty of people who have fallen in love with automated trading in the forex market and they have found terrific success on the market but settling on a system that is designed to follow out their wishes no matter the hour of the day.

But there are other people who have found some of the shortcomings and downsides of using an automated trading program for forex trading and they are completely valid in their complaints too.

Let’s go over both the good and the bad of automated trading systems.

Pros ✔️

They Work 24/7 ⏲️

One of the best things about forex investing is that you can do it all day long, and all night long too.

Many markets have hours when they are opened and closed. You can only trade during these business hours. Take the American stock market, for example. No matter where you are located, if you want to partake in the US stock market, you’ll have to do it during their open hours.

With the forex market, you can trade at any time. That is a huge benefit to people, and an automated trading system will allow you to make your trades at 2 AM when you are fast asleep. You don’t have to actually be awake and at the computer.

No Emotions 😶️

Many people refuse to pull the trigger on a great trade – or they pull it too quickly – because of emotions.

People get cold feet or they get too excited. They let their emotions get the best of them. But with an automated trading system, that is all taken care of. These programs will have a task designed into it and will carry it out.

Cons ✖️

Mechanical Issues 👎️

Even the best computers will have a set of problems that pop up from time to time. Take internet connectivity, for example. When your WiFi goes out, you are completely cut off from the internet. And, obviously, you need the internet to be working to make your trades.

If your internet goes out and your system is scheduled to automatically make a trade when certain parameters are met, this simply will not happen. That’s a pain in the neck and you can wake up from a good night’s sleep to find out that you missed out on a great opportunity.

This stresses the fact that you need to only invest in the right automated trading system. They can be great for your trading career in the forex market, but only if you come up with a good plan, create a strong system, test it, and then put it into practice.