The Fundamental Principles of Forex Auto Trading

The Fundamental Principles of Forex Auto Trading

Principles of Forex Auto Trading

Auto trading also called Algo trading refers to trading, with the help of a  trading software. Traders today have two ways of carrying on with their trading business: Manually or with an automatic system. Both of these methods have their pros and cons. The term manual trading refers to a trader using Forex strategies to analyse the market, using indicators and charts, using their own logic and strategy. On the contrary, a trader using an automatic system, lets the computer, trade for him. In such kind of trading, it is the software program, armed with predefined instructions, that trade for the trader.

In most likelihood, auto trading systems are opted for by traders who are either

  • Into Forex trading, part-time or ;
  • Who wants to be into FX trading full time, but are working full time too

The bottom line here is that FX trading needs screen time. Unless this is affordable, FX trading is impossible without an auto trading system. Here it would be sensible to understand the Fundamental principles on which a Forex auto trading system works :

  • A software system, an FX auto trading platform trades according to the instructions given
  • Once a software stars trading, there is no stopping it, until it reaches the stop-loss order or the trader quits trading
  • The auto trading software can be customized
  • Unaffected by emotions
  • Cannot make any kind of decisions

An Automated system that needs to be directed:

Every FX trader has to go through a broker. Most of these brokerage firms have their own auto-trading tools or software. These tools or software are pre-programmed to trade in a particular way. In other words, the software is all set and directed to perform its task as required by a trader.  Hence they are coded to function in a particular way. However, not every trader might like what is being offered. Especially since a trader, after trading in a demo account, will gradually develop his or her own style of trading. Eventually, they also develop their own strategies. Hence these auto FX  trading systems need to be directed towards what one needs.

Automated nonstop trading:

An auto trading system starts trading or tapping the FX market looking for trading opportunities the moment its logged into. If the software detects a ripe opportunity to enter the trade, it does. Once it starts trading there is no way to stop it, midway.

In auto trading, it is therefore extremely important for a trader to define his stop-loss order way before he defines any other criteria like the trade position etc.

FX auto trading customization:

As stated earlier, a trader has to develop his own set of strategies when he is trading. The software might not have the parameters that the trader is looking for. Forex expert, Kishore M states, “At this point in time, a trader would have two options to chose from; 

  • Write the software codes for the new parameters that the trader needs; or
  • Get someone to write those codes, to customize the Algo trading system It is easiest done for the software professionals who trade”.

Emotionally Unaffected:

An auto trading system trades, without getting affected by any events. Win or lose, this system will trade till a stop loss order closes its position. Most importantly, even after a loss, an auto trading system will not divert from the strategy that it has to follow. Unlike an individual trader, trading individually, where a loss often leads to “averaging”. A software has no scope of doing this (averaging).

Cannot respond to the situation as needed:

This is an understood phenomenon. Kishore M says,” Some situations in the FX market, demand a spontaneous reaction and on the spot decisions. This might be a diversion from the usual trading style which may need a human mind to react likewise”. For instance, when a trend is going against a traders speculation, an automated system will continue trading until the stop loss order is reached. In comparison, a trader trading with a manual tool might stop trading at this point in time altogether.  This is a drawback that any software driven system has.

Trading via an automated system is a trend that is catching up. Full-time trading demands screen time. This is one drawback that is prompting traders to opt for FX  auto trading. With technological advancement and a need to keep an eye on the trading front as a bot trades for a trader, remote controlled and viewing enabled auto trading systems are also available today.


With the Forex market being a lure to many today, auto trading is also a viable choice. Many traders work full-time yet intend to make FX trading a second source of income, eventually making it to being a full-time FX trader. Till they are proficient in the trade, the traders auto trade with smaller investments and smaller positions. Auto trading systems for these kinds of traders is a big help.