dbFX
dbFX Representative
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One of the most interesting developments in retail FX trading over the past 12 months has been the growth in the usage of automated trading systems (or algorithms). Indeed, trades generated by automated systems grew significantly in 2009, representing almost 20 percent of dbFX’s customer flows.
As the name suggests, automated trading systems (which can be bought over the internet and plugged into a <a href= "http://www.dbfx.com/forex-trading-platform"> forex trading platform </a>) use complex algorithms to produce automated trading signals and help traders in their day-to-day trading activity. However, crucially, these systems should supplement an investors trading behaviour – not supplant it, and for those investors considering using an automated system to trade FX, there are some key points to bear in mind.
Firstly, does the overall forex trading strategy provided by a system match the trader’s investment objectives? For example, someone with a low risk investment strategy will want an algorithm that allows for lower levels of leverage and consistently use stop loss orders to limit the down side risk. Those with more aggressive trading objectives may choose a system that uses higher leverage levels and trades more frequently.
Secondly, a trader should ask; is the system logical to me? A trader using an algorithm for the first time may look for a straight forward system that uses stock standard procedures, e.g. having two moving averages with trades executing when they cross. A more advanced trader may look at a system with complex algorithms, and might prefer one that involves sophisticated time series for complementary currency pairs.
Finally, traders should undertake thorough back testing, including: an evaluation of the leverage used, the swings in profits and losses, consideration of the max draw downs, and the profitably of the trading system after all costs including any commissions have been paid.
Once underway, traders should continually monitor the trading system’s performance to ensure their algorithm is delivering the results they are looking for, and that it is helping them meet their investment objectives and risk tolerances.
For further details on <a href= "http://www.dbfx.com/forex-trading-solutions/automated-trading"> automated forex trading </a>, as well as solutions offered by dbFX to sophisticated retail FX investors, please visit <a href= "http://www.dbfx.com"> www.dbfx.com </a>.
As the name suggests, automated trading systems (which can be bought over the internet and plugged into a <a href= "http://www.dbfx.com/forex-trading-platform"> forex trading platform </a>) use complex algorithms to produce automated trading signals and help traders in their day-to-day trading activity. However, crucially, these systems should supplement an investors trading behaviour – not supplant it, and for those investors considering using an automated system to trade FX, there are some key points to bear in mind.
Firstly, does the overall forex trading strategy provided by a system match the trader’s investment objectives? For example, someone with a low risk investment strategy will want an algorithm that allows for lower levels of leverage and consistently use stop loss orders to limit the down side risk. Those with more aggressive trading objectives may choose a system that uses higher leverage levels and trades more frequently.
Secondly, a trader should ask; is the system logical to me? A trader using an algorithm for the first time may look for a straight forward system that uses stock standard procedures, e.g. having two moving averages with trades executing when they cross. A more advanced trader may look at a system with complex algorithms, and might prefer one that involves sophisticated time series for complementary currency pairs.
Finally, traders should undertake thorough back testing, including: an evaluation of the leverage used, the swings in profits and losses, consideration of the max draw downs, and the profitably of the trading system after all costs including any commissions have been paid.
Once underway, traders should continually monitor the trading system’s performance to ensure their algorithm is delivering the results they are looking for, and that it is helping them meet their investment objectives and risk tolerances.
For further details on <a href= "http://www.dbfx.com/forex-trading-solutions/automated-trading"> automated forex trading </a>, as well as solutions offered by dbFX to sophisticated retail FX investors, please visit <a href= "http://www.dbfx.com"> www.dbfx.com </a>.
