Automated trading strategies for forex traders

Many traders are dedicated, rational thinkers who are constantly scouting for opportunities, and this is the type of trader you may want to partner with. When it comes to automated trading, these traders are prime choices. Traders are often attracted.

  • By Ashley Jessen

  • July 13, 2018
  • 11:56 pm BST

Many traders are dedicated, rational thinkers who are constantly scouting for opportunities, and this is the type of trader you may want to partner with. When it comes to automated trading, these traders are prime choices. Traders are often attracted to this trading method because it allows them to team up with like-minded traders. By developing a good automated strategy and following the right trading tips, traders can rely on technique rather than just the probability of a good trade.

To gauge if a trade is a good deal, you can follow four key points – one for each letter in the word “deal”:

  • Description
  • Entry/Exit Signs
  • Application
  • Leverage

Even if your strategy boasts all of these qualities, it still does not guarantee a profitable trade. No one can predict the outcomes and happenings of the markets from one moment to the next, but by incorporating these principles, you can strategically increase the probability of profitable trades based on careful planning and in-depth understanding.

Description

The first quality to consider when preparing for automated trading is the piece of Forex trading advice that looks at the description of your strategy. In other words, analyze what the strategy means and the ideas behind it by looking out for keywords like “stop loss”, “profit”, “target” and “risk”. When you unpack the description of the strategy, you can first identify the ideal market conditions in which this strategy should be used. It is important to remember that each strategy is best suited to a specific type of market condition. When you have identified this condition, you can plan accordingly and wait for the prime market environment to make your trades.

Entry/Exit Signs

The entry and exit signs can often become a daunting aspect of a trading strategy that can cause high amounts of stress. While these aspects are important, it is more helpful to keep the general logic behind the strategy as simple and straightforward as possible. Each individual trade is not of great importance on its own; instead, it’s the collection of trades as a whole that counts, as the strategy will make provision for ample trade opportunities. You can analyze your collective trades by comparing the average amount of losing trades to the average amount of winning trades and see which is higher. You can also take the last 10 or 20 trades and find the average results of those trades.

Application

Using the market condition that you found through the strategy description, you can then identify those suitable markets as they arise. This step is vital when working with an automated trading strategy. In general, there are two main types of markets with a few variations in between. For the purpose of automated trading, we can focus on trending and non-trending markets, also commonly known as ranges. A market trend will show higher highs and lows in an uptrend, or you’ll see lower highs and lows in a downtrend. This forms various ranges that develop for a complicated number of reasons that won’t be discussed in this article. The important thing to know is how to identify the market condition and apply it to your strategy.

Leverage

Leverage is another aspect that is often overlooked when choosing a strategy. It is easy to make the mistake of having expectations that are too high and therefore applying a leverage that is too high. This can happen if you focus on potential successes and forget to factor in potential risks. The safest option is to make use of a conservative leverage of around 10 times effective leverage. This way, you are still trading with the possibility of increased profits while ensuring a certain level of safety with your finances and capital.

By using the DEAL checklist, you can produce well-planned automated trading strategies.