Forex Trading Systems: Boon or Bane

Jul 10 • Forex Software and System, Forex Trading Articles • 4710 Views • Comments Off on Forex Trading Systems: Boon or Bane

There are always two sides of a coin – the same holds true for forex trading systems. In as much as there are a lot of traders waxing praises about automated trading systems, the downside of these trading systems cannot, and should not, be ignored by anyone considering to by one of these trading tools. A forex trading systems is essentially an automated tool that traders can use in order to trade the forex market. This is done by entering instructions on the program and having the program transmit his orders to the global forex interchange.

There seems to be no other better way to trade the forex market today than through these modern trading tools. Modern traders, however, will have to take note of the disadvantages these tools provide so that they can take the necessary steps to maintain the system’s usefulness in their trading activities.

Forex Demo Account Forex Live Account Fund Your Account

Some of the most common downsides to using automated forex trading systems include:

  1. Power and connection issues. Forex trading systems run on electric power and the trading orders go through internet communication lines. As such, disruptions in power or internet service can also affect one’s trading activities. In some cases, trading orders are left on the computer and are not sent out for implementation. Power outage problems can be addressed by having a stand-by alternative power source that can run the computer for a few hours or at least an ample amount of time during which any position can be taken and trades can be executed. Internet connection issues are often solved by server-based trading platforms and software.
  2. User dependency. These systems do not run independently and cannot possibly make their own trades. Even if there are wizards on some of these systems, traders will still have to be able to choose their options themselves and indicate the kind of analysis they want to use and what kind of indicators to use as basis for making a trade. The trading system is dependent on the trader and will execute whatever trading instructions the trader inputs. Those who think that they do not have to learn about the technical aspects of the forex market are definitely mistaken.
  3. Tendency to curve-fit. The term curve-fitting refers to the way most forex trading systems “force-fit” current trends with past data. This practice results in unrealistic projections using back-tested results that are not reliable and guaranteed to remain the same given current conditions. Curve-fitting is also referred to in the market as over-optimizing. It is important that everyone trading the forex market, whether with an automated system or through manual means, realize that there is no perfect way to trade the market and be assured of gains. Curve-fitting only succeeds in failed live trades that otherwise showed positive results in back-testing.

Knowing these disadvantages presented by forex trading systems would allow traders to adjust their trading strategies and routines accordingly. There is no perfect trading system that will bring perfect results every time. What every trader should concentrate on is learning how to device the right trading strategy for his kind of risk appetite and his available trading funds. While doing so, it is highly recommended to test strategies for lengths of time before applying them to live trades.

Comments are closed.

« »

Disclaimer: The content of this material is a marketing communication, and not independent investment advice or research.

The material is for general information purposes only (whether or not it states any opinions). Nothing in this material is (or should be considered to be) legal, financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by FXCC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Although the information set out in this marketing communication is obtained from sources believed to be reliable, FXCC makes no guarantee as to its accuracy or completeness. All information is indicative and subject to change without notice and may be out of date at any given time. Neither FXCC or the author of this material shall be responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein. Seek independent advice if required