One of the biggest obstacles to successful forex trading for the ordinary part time trader is the need to constantly watch the market.  Forex is also a 24 hour per day market, closed only on the weekends.  This can make it difficult to manage a position – it is easy to miss a good trading opportunity, or be unable to close a position.  At the same time, emotions can play havoc with your account – you can easily be overcome by excitement or fear.

Whilst you could put stops in place to partially manage risk, another approach is to used automated trading.  Think of automated trading as a robot that sits at your trading terminal and places and closes trades.  This article is about automated trading systems, and discusses a few of the systems available.

What does an automated trading system do?

An automated trading system has the following characteristics:

• Is either web based, or is installed on your PC (typically only available for Windows)
• Acquires price data automatically from your broker and stores this internally
• Executes one or more predefined trading systems – applies these rules to the incoming data
• Automatically sends buy or sell orders to your broker for execution
• Monitors open positions, and may close them automatically

An automated trading system can be left on autopilot and theoretically automatically increase your account equity over time, with no involvement from you other than selecting the original trading strategies.

Details of some automated trading systems

Here are some automated trading systems that are currently available.  If you know of any others, please let me know.

Trade Robot (www.traderobot.com).  This system has been around for a while.  It can trade accounts with FXCM and Dukascopy.   This system can either be used with external system providers, or your own system (typically developed using a tool such as TradeStation).

I have used this tool only with external system providers.  I obtained mixed results, not as a result of Trade Robot itself, but because some of the trading systems used were not particularly strong, and drawdowns were far more than I anticipated.  I think that Trade Robot would be a good tool to use with your own tested strategies.  When I had some problems, the support team was quite helpful.  This tool now costs $500, which may put off some traders.

FXCM Forex System Selector (www.fxcm.com/forex-system-selector.jsp).  This has only just been released.  Similar to Trade Robot it offers a range of prebuilt trading systems from various providers.  You can blend systems to build your own, plus override the system risk settings, then backtest to measure the result. GoForex appears to offer the same or a similar system.

This system seems quite well designed, although I have not used it myself, so can only comment on what I have seen.  One benefit is that the system is web based, so there is no software to install.   This means that you are not at the mercy of the stability of your PC and connection.

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Tags: automated forex trading, Forex Trading, trade robot, tradestation

This entry was posted on Saturday, April 5th, 2008 at 5:00 am and is filed under Automated Trading. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.