When it comes to FX trading the common conception is executing a trade manually. But with the rise of forex bots, many traders are inclining towards more of an automated approach progressively. Trading with the help of automation refers to taking part in a trading scenario via certain computer programs that act on some pre-established rules to initiate and execute a trade. These automated trading programs are beneficial for saving time by enabling a trader to execute multiple orders in the least period. Coming to choosing the best automated forex trading systems you can either purchase them from a reputed seller or can simply build them as per your preference.
But before we come to the ‘how-to’ part of building an automated trading system, let’s take a look at the different perks of both buying and creating a system.
Creating a system on your own
In terms of creating a customized program, a thorough grasp of trading in the international marketplaces with the knowledge of technical analysis is required for a trader. But the major advantage of developing a fully customised system is that the possibilities are almost endless. The only obstacle you might face is your own vision and the coding accordingly. However, once you’ve planned the design of the system on paper, you can easily employ a developer to do the rest.
Opting for a premade system
Although some traders tend to go for buying a premade one for avoiding the hassle of building a program from the scratch, these systems often lack authoritativeness. If you tend to skip the process of researching the product before purchasing you can even face scammers and inadequate systems. But you will have the flexibility to select a product in an instant if you utilise MT4 or ProRealTime.
5 steps to create a custom automated trading system
1. Outline a trading strategy
A plan based on the activities during trades can assist you to outline your goals and how the automation process can keep you on track to achieve them. To implement a thorough outline of your strategy there are certain factors you need to keep in mind. These include the risk-reward ratio, the market you are planning to use the system to utilise as well as the timing and strategy to execute the trade.
2. Construct your own system
It’s vital for you to determine how you want the system to work once it locates trading possibilities. You might want it to initiate a trade on your absence with nominal manual interference or simply alert you about the best possible time to open a position. Consider the instruments and signals you typically use to identify patterns, such as moving averages and relative strength index, and also on the factor of selecting the best time to execute trades, while developing your strategy.
3. Determine the tools regarding risk management
The most crucial aspect of your program’s structure is choosing which approaches it will implement in terms of risk management. While a simple stop may close an open position nearest to the specified price limit, it can also stop at a lower price if the market tends to fluctuate rapidly. In case of a guaranteed stop, you will be required to spend a small amount to stop close the position at the exact specified level.
4. Develop a fully automated forex trading system
Since every platform has its own programming language, you ought to tailor your program to the platform you intend to utilise. While having a basic idea of what may be programmed is beneficial, you don’t have to become a professional in the field.
5. Perform backtest to refine your system
Backtesting your trading program using past data and tweaking it to reach your target goals and objectives is the last phase of this process. Although static data isn’t necessarily indicative of what will emerge in an actual trading environment because it doesn’t account for elements like liquidity; but it is crucial since it will allow you to have a clear picture of how the system will function without risking your funds at stake.
With that being said it is important to comprehend that even the finest automation trading systems can have glitches or anomalies. This is why staying constantly updated is crucial in case of any sudden issues or fluctuating market conditions.