Forex Automation Software for Hands-Free Trading.
Marc Davis is the author of several books and has 20+ years of experience writing about business, finance, and economics.
Updated January 29, 2022.
Reviewed by.
Reviewed by Charles Potters.
Charles is a nationally recognized capital markets specialist and educator with over 30 years of experience developing in-depth training programs for burgeoning financial professionals. Charles has taught at a number of institutions including Goldman Sachs, Morgan Stanley, Societe Generale, and many more.
Fact checked by.
Fact checked by Ariel Courage.
Ariel Courage is an experienced editor, researcher, and fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.
If I told you there was a foreign exchange (forex) trader who is smart, unemotional, logical, ever-vigilant for profitable trades and who executes trades almost instantly when the opportunity arises and then posts the profit to your account, wouldn't you want to hire this person right away?
Well, with automated forex trading software, you can have all of those qualities and more. Also known as algorithmic trading, black-box trading, robo or robot trading, automated forex trading programs offer many advantages. It is designed to function without the presence of the trader by scanning the market for profitable currency trades, using either pre-set parameters or parameters programmed into the system by the user.
In other words, with automated software, you can turn on your computer, activate the program and walk away while the software does the trading for you.
How Does Automated Forex Trading Software Work?
Automated forex trading software runs on a program that analyzes currency price charts and other market activity over multiple timeframes. The software identifies the signals – including spread discrepancies, price trends, and news that may impact the market – to locate potentially profitable currency pair trades.
For example, if a software program using criteria the user sets identifies a currency pair trade that satisfies the predetermined parameters for profitability, it broadcasts a buy or sell alert and automatically makes the trade.
The Upsides of Automated Forex Trading Software.
A major advantage of automated forex trading software is the elimination of emotional and psychological influences determining your trading decisions in favor of a cold, logical approach to the market. Beginner and even experienced traders may sometimes make a trade based on some psychological trigger that defies the logic of market conditions. With automated trading, such all-too-human lapses of judgment just don't occur.
That's because automated software is intended to make your trading decisions unemotional and consistent, using the parameters you've pre-established or the settings you've pre-installed.
For currency speculators who do not make trades based on interest rates but rather on currency spreads, automated software can be very effective because price discrepancies are immediately apparent, the information is instantly read by the trading system and a trade is executed.
Other market elements may also automatically trigger buy or sell alerts, such as moving average crossovers, chart configurations such as triple tops or bottoms, other indicators of resistance or support levels or potential topside or bottom breakthroughs that indicate a trade signal.
An automated software program also allows traders to manage multiple accounts simultaneously, an advantage not easily available to manual traders on a single computer.
Serious traders can also benefit from automated software, as their other interests, obligations or occupations may not afford them the time they need to study markets, analyze charts or watch for events that affect currency prices. That means that night or day, around the clock, the program is at work and needs no human, hands-on supervisor.
Selecting an Automated Forex Trading Program.
There is no one-size-fits-all approach to forex trading, and the same goes for your automated software – every program has a number of trade-offs.
Of the numerous automated forex trading programs offered on the market, many are excellent, even more, are good but are not comprehensive in their features and benefits, and a few are less than adequate.
Although some firms advertise "over 95% winning trades," consumers should verify the validity of all advertising claims. In some cases, software providers will provide authenticated trading history results to demonstrate the efficacy of the programs they're selling. However, it's important to be cognizant of the oft-used disclaimer – past performance is no guarantee of future results.
Below, we've outlined a few of the key selection criteria for traders considering automated programs.
1. Fit Automated Forex Trading Software to Your Needs.
Automated trading systems vary in speed, performance, programmability, and ease of use. Therefore, what serves one trader well may not be acceptable to another.
For instance, some traders will want a program that generates reports or imposes stops, trailing stops, and other specific market orders. Real-time monitoring is also a "must-have" item in an automated system. Other traders, especially beginners and the less experienced, may want a simpler "plug and play" type of program with a set-and-forget feature.
Remote access is also essential if you're a frequent traveler or intend to be away from your computer for an extended period. A web-based program may be the most useful and practical means of serving the needs of a roaming trader, as they're guaranteed to function with a basic WiFi signal.
In lieu of generic WiFi, Virtual Private Server (VPS) hosting is a service worth considering for the serious forex trader. The service provides extremely fast access, isolates the system for security purposes and offers tech support.
2. Fees and Guarantees.
Fee transparency is a key quality to look for in providers, as some firms charge trading commissions and additional fees, which can draw down your profitability, so check the fine print in your user contract.
Firms may also offer programs with return guarantees after purchase and during a specified period of time. Therefore, if the user decides the program is unsatisfactory, those firms will allow you to return it for a refund.
It's also worthwhile to check out online customer reviews of many of these programs for an additional viewpoint on their virtues and flaws. Some programs offer a free trial period or other incentives to buy, while other vendors provide a free demonstration to familiarize the user with the program.
3. Take It for a Test-Drive.
Since automated programs can be a costly investment, make sure firms can provide videos of their software programs functioning in the market, buying and selling currency pairs. Additionally, it might be helpful to request screenshots or video walkthroughs of account action with trade prices for buy and sell transactions, time of execution and profit posting.
When testing a new software system, run the tutorial or training function to see if it's adequate and answers all of your questions. You may have to call the support desk for answers to complex questions about programming, such as setting the buy-sell criteria and using the system in general. If a "Help" link is offered, determine ease of navigation and usefulness. Some of your questions may not be answered through information in the help section, and knowledgeable support from the system provider will go a long way to making a seamless trading experience.
Firms may also offer a free, no-obligation test of their software so that the potential buyer can determine if the program is a good fit. If this is the case, test the program's installation and user experience functionality. Also, make sure the software is programmable and flexible in the case you may want to change any pre-installed default settings.
Automated Forex Trading Software Purchase Checklist.
Below we've summarized of a few of the key points in the form of a checklist to consider as you go through the automated forex trading software purchasing process:
The most popular automated software systems will trade the leading currency pairs with the highest volume and most liquidity, including USD/EUR, USD/CHF, USD/GBP, and USD/JPY. Trading approaches will vary in risk, with programs geared to scalping a few points in a trade to taking larger bets. The user should be able to dictate which approach to use, and the strategy may be adjusted in either direction. Customer product reviews that are posted online are a good source of information about the software. It's highly advisable to read these before buying. Price competition currently favors the consumer, so shop around for the best deal, but don't sacrifice quality for the price. Prices for trading packages run the gamut from hundreds of dollars to thousands. Look for a high level of technical and service support. This is essential for traders at any level of expertise but is especially important for beginners and new-comers.
Beware of Automated Forex Trading Software Scams.
Scams are an unfortunate reality in the automated forex software market, but they may be avoided by conducting due diligence on any firm. Check the websites of both the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) for consumer alerts.
On the CFTC site, this information is available by clicking the link under consumer protection. The NFA site has a database of registered member firms.
The Bottom Line.
Whatever your level of expertise is in forex trading – beginner, experienced or veteran – automation software can help you be successful.
Despite the evident benefits of using automated forex trading platforms, these programs are far from infallible and the user must be aware that this software does not guarantee an endless run of successful trades.
Yes, there are always potential risks when trading in any market, but automation software may help you avoid serious losses. Most importantly, keep a checklist of the most important features you're looking for in a program, the level of customer support, and of course, that no trading system can guarantee 100% winning trades and that past performance is no guarantee of future results.