Automated Forex trading systems are relatively nascent, yet they’ve garnered considerable attention from the trading community at such a relatively short period of time. After all, who doesn’t want to make money while playing golf at the country club or binge-watching their favorite TV series?
While automated systems are absolutely promising, it takes some time to learn how to wield it properly. If the proper steps are not taken, you risk burning through capital. Here’s how to use a forex strategy with an automated forex trading system like a professional trader.
Deciding on the Right Trade
Using a fully automated trading system should start with identifying parameters of the right trade. Everyday, there are countless opportunities in the foreign exchange market. However, not all setups have potential for profit. This is why you should be deciding what type of trades your robot should narrow down to.
Base your decision on your trading personality, investment objectives, and market environment from a global macro standpoint. For example, if the current market environment is in consolidation because of inactivity from both economies, the robot should stay on the sidelines as per your instructions.
Checking the System Regularly
Like a mechanic, you have to fine-tune your trading system routinely. See if previous trades taken do match the parameters you set. When market environments change, whether driven by investor sentiment or geopolitical turmoil, adjust your system accordingly.
Journaling is a great way to check your system’s performance and make necessary adjustments. Journal entry and exit price points, position sizes, risk to reward ratios, daily volatility, and even the movement of the currency pair you are trading in relation to its correlated pairs.
Benefits of Automated Trading System
Compared with manual systems, it’s far less stressful to trade with automated software. You simply set parameters and let it do its work. Consequently, you remove emotions from the equation. And emotions in the trading business, as you may have heard, is a detrimental factor for success.
Fear, greed, and anger can drive you to make poor decisions like closing a profitable trade too early or losing more than what you intentionally planned to because you refused to accept you were wrong.
Using automated systems also lets you cover more ground when trading. Say you wanted to trade NZD/USD but also wish to participate in exotic pairs like USD/SEK. If you have three or four price charts to look at every hour of every day, you can easily get burned out. By automating your trades, you effectively micromanage currency pairs of interest without exerting too much effort and focus on each pair.
When learning how to use a forex strategy with an automated forex trading system, you should start with the most basic systems. One example is the MACD crossover system. Basically, you instruct the robot to buy if the 50 EMA crosses above the 100 EMA line on the 4-hour chart. However, the MACD indicator should also simultaneously cross over the zero level before it becomes a legitimate trade and vice versa for a short or bearish trade.