Automated Forex TradingAutomated Forex Trading is a dream come through for many beginning traders. Just think about it – a Trading System that trades and makes money for you while you sleep or party, I would say that is anyones dream. However, even to remotely touch this dream you need to do a lot of hard work. Or buy a canned Trading System developed by someone else (aka Black Box System) and handover your hard earned cash, without any guarantees of course. When something sounds too good to be true it usually is. Now, if you are interested in a Black Box System then scroll down and study my tips about these kind of systems. Now, it is possible to create an Automated Forex Trading System that makes you money 24 hours a day, 5 days a week, but the road to get there is long and filled with disappointments. If you are determined to do the work then you can have a decent Automated Trading System ready in a few months. I have been developing Automated Trading Systems for many years and I can tell you that to create a balanced Trading System is very difficult indeed. With balanced I mean a System that is profitable enough to be worthwhile trading and at the same time robust enough not to put you into panic mode when the Trading System faces a losing streak (aka Drawdown).
Let's say that you are really hooked on Automated Forex Trading and would like to develop your own Trading System. If any security is ideal as a basis for Automated Trading it is Forex. The reason for this is that the data is continuous (as opposed to Futures) and seldom has gaps and other big jumps in the data (as opposed to stocks). What you need to consider now is how you are going to implement the Trading System. There are three ways:
Whatever way you choose, nothing can replace experience. Start out with a very simple Automated Forex Trading System like simple Price Channels, a traditional breakout type of System. In EasyLanguage it is written like this: Inputs: Length(20) ; Buy next bar at Highest(High, Length) + 1 point stop ; Sell Short next bar at Lowest(Low, Length) - 1 point stop ;
As you can see the code doesn't include a stop loss (it is always in the market), you need to work on that. When you have translated this into your language and added a stop loss, then try it on several different time frames and currency pairs optimizing the length and following my advice above. The Price Channel System will work fine on some time frames and currency pairs and not on others. Where it works, use it as a baseline for the development of your own Trading Systems. If you can beat this System then you have something to begin with. Take a look at the equity Curve of the Price Channel System optimized on EURUSD 377 tick bars:
Notice the periods where the Equity falls sharply (aka drawdown), for example in the very last part of the curve. This system is not good enough to trade, but gives a solid baseline to work with. Good luck! Black Box Trading SystemsI have never bought a Black Box Trading System and I will never do it either. For some traders though it might be a valid alternative, especially if you have very little knowledge or interest in computers and programming. If you haven't read through the above about automated Forex Trading, then do it now because it will give you some knowledge into the secret world of Trading System Development. Please remember that if you decided to use a Black Box System, you are putting your hard-earned money on the line for something you do not know how it works. It needs a giant leap of trust to trade such a system with real cash - your cash. Automated Forex Trading is not for everyone. Before you pay for a Black Box System consider the following:
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