Automated Forex trading system

May 12th, 2015

fxrobot

Automated forex trading system or Forex robot trading.
Many people dream to create a mechanism, which brings profit automatically without the need for constant active participation. The same applies to forex trading.
But is it realistic? Is automated forex trading system or a so-called adviser  able to trade consistently and successfully? What principles does it work?
How easy is it to create? What types of adviser exist? Which of them are worthy of attention?

So what is the automated forex trading system (AFTS)?
AFTS or forex robot – a system that works without your participation, completely independently. It does not require for your mind to open the position, but nevertheless working according to the rules that you had established. Therefore there is no need to sit for hours in front of the monitor, waiting for the right signal. Automated trading system do it for you.
In essence automated forex trading system – a program that has a set of rules governing the opening and closing of the transaction and independently establish the order on the trading platform.
The principle of operation of the robot can be based on anything, such as a crossing of the moving averages.
What traders think about automated forex trading systems? All traders can be divided into two unequal groups.
Most of them do not even believe in the existence of such systems, and especially in their effectiveness. A minority believes that such systems exist and may even be profitable.

All existing robots can be divided to automatic and semi-automatic.

Automatic after installation do not need any your further action. The system automatically opens a transaction, calculates and sets order stop loss and take profit, and then closes the deal.

Semi-automatic system analyzes the situation on the market and just indicates suitable conditions for the deal. And the trader has to opens a deal manually.

So it it possibly to create a really automated forex trading system that works successfully and completely automatically? The most common trading platform is Metatrader, which allows programming and creation of various trading systems. Therefore if you have a working trading system, it is possible to write a program,
which will work by your system. But your system must be really profitable. In addition, to create and configure the program for automatically trading is quite a serious matter, so better charge this a professional. In any case, automated forex trading system must be tested on a demo account at least 3 months before you let it deal with real money.

And of course you should not to sit in front of the computer and staring how the robot works. First because you lose precious time, and in fact a robot created for saving your time. Secondly you will always be tempted to intervene in the operation of the robot. Of course periodically, at least once a day, you need to check the results of automated trading. And if the results are acceptable, then that’s enough. This is just one of those cases where the best strategy is – “Works – do not touch!”

The two main advantages of the robot – Forex robot is never tired and has no emotions. At the same time, the robots have their drawbacks, which often exceed their dignity. Therefore, the creation and use of robots is allowed only by experienced traders. For automated forex trading system is necessary a special program, which must be setted according to your preferences. For correct work of robot the computer must be turned on and connected to the Internet nonstop. It is necessary that the robot has its own computer.

That means that the computer is not used for any other purposes, and that no one had access to it. Any failures in the system, reboot, loss of Internet connection or even children playing at the computer can lead to the risk.
Protect yourself from these risks by using the virtual server or VPS (Virtual Private Server). VPS – this is a server belonging to a specialized company that provides remote access to it through the Internet. The advantage of such a server is reliable trouble-free operation.
If for some reason you do not want to use a virtual server, at least minimize the risk of using your computer. For this purpose as mentioned select a single computer to the robot, which will not have access anyone except you, provide reliable computer and internet connection source and uninterruptible power supply.
Create a robot can programmer on the basis of your trading system. Although not every trading system will work automatically.
Another option is to buy a ready forex robot. The market offers a great variety of them. Prices vary as well as the quality. Therefore, before buying visit specialized forums to gather maximum information. Next, test the forex robot on a demo account, experiment with the settings. And only when you’re sure that the program is working as it should, you can let it work with real money.
And whether is it necessary to trust your money the robot?
Doubtless advantages of the robot are time saving, lack of emotion and fatigue. You do not have to sit for hours in front of the monitor, waiting for the right signals, the psychological factors do not affect on your trade. On the other hand, the person adapts to market conditions change better than a robot. Having money under personal control is better, and indeed, any automatic system may sooner or later stop working.
Therefore, the best solution would be to use the robot as an additional assistant. And let it trade a small amount of money, periodically monitor its work and turn it off while waiting for important news on the market.

How to start Forex trading

May 11th, 2015

career process
How to start Forex trader career?

Probably everyone who is interested in Forex, ask questions, how to start trading Forex? what you need to learn?

Answer all of these questions is not easy. Start definitely need a theory (general concepts, the price movement, indicators, trading system, money management, psychology), gradually adding practice. As they say, a theory without practice is dead, but the practice without theory is stupid.

Brett Steenbarger recommends the following sequence  to start Forex trading

1) Learn to understand the market – understand the supply, demand, trends, levels of consolidation, how the market determines the price, time periods, price, volume of transactions formating prices. There are the basics you need to know about the financial markets. Very often, many novice traders in the early stages of learning in detail study specific technical moments instead to first figure out how markets function.

2) Start with the observation – I say this so often that everyone is tired. But it is really very important to protect your capital and psyche during the learning process.
Plunge headlong without proper training to the market, which is full of experienced traders (sharks of trading) – a sure way to lose capital and get unsuccessful impression of the financial markets. When I started my study, I print all the daily charts, which I carefully monitored and studied. Today there are kept piles of these graphs in my office. Daily analysis of these charts helped me to see the movements of the market all the important points, breakouts, confirmed and unconfirmed forecasts. Train your eyes, before you risk your capital. Learn on one or two models and use them. Quality sites dedicated to trading and books are good source of information, start with them. Do not hurry to make trading your main occupation and the only source of income. It’s not as easy as people think. This is a serious job, a huge burden on the psyche, and the majority people simply do not survive.

3) Start with a demo forex account – certainly trade on paper or demo account is not the same as a real trade.
But it’s a good start. After all, chess players practice before championship. Demo account allows you to make mistakes and analyze them before risking real money.

It is also very important that the first training session took place without any commitment to make money anyway. If you cannot make money on demo account, the chance to earn at a real account even less. Trading in the demo is a kind of intermediary between the dry theory and the real practice, so you need to give it enough time. Many trading platforms such as MT4, offer a free demo account. These programs help to acquire the necessary experience and track changes in your trading.

4) Start thinking like a trader – that means to understand what traders focus in the analysis of markets, economic indicators and stock news. Sign up for financial news, read blogs devoted to trading, visit forums where traders communicate. Observe and, if possible, communicate with successful traders, listen to their advice.

Psychology and risk

May 11th, 2015

risk

One of the most important components of successful Forex trading is the psychological preparation to risk and the ability to make decisions and act under stress.

The meaning of selective thinking is the ability to separate your thoughts and predictions about the situation on market of existing positions. If you look at market through the lens of your open positions, the psyche trying to see what you`d like, not what is really happening.

It often happens that a demo account trader shows excellent results, but as soon as it comes to real money, there is going something strange with the psyche.
Trader stop to think rationally, loses self-control and trading results are much worse. Therefore, the ability to selective thinking determines the level of success.

The next problem of most beginner traders – the inability to establish the permissible amount of losses. Not a problem to close the deal at a profit lower than had planned.
But if the position is losing, even if the loss is not yet significant, then there is the a problem to close the deal and fix the lost. They are waiting and hoping that the situation change and the market will turn to the right direction. But often it does not happen. On the contrary, the situation is further deteriorating, and finally when the trader decides to close unprofitable position, the size of losses simply unacceptable. This can be avoided by closing
loss-making position immediately before the loss is not yet large. Generally, this should be planned before opening the position. Immediately after the opening, set stop loss. But the mind of inexperienced traders does not let them to do it. It persuades them that everything will be fine, it’s just a correction or even false breakouts and situation will normalize very soon. But as a rule it is self-deception.

The ability to be not affected is the ability to make decisions without taking into account the crowd sentiment, analysts, or colleagues. The trader must be able to separate the important information from unnecessary noise and do not be influenced by the environment.

We can say that the lack of discipline and endurance cause 80% of traders bankruptcy. On the other hand the presence of these qualities makes the remaining 20% successful and wealthy. And this is not surprising, but 80% of traders will continue to underestimate the psychological aspect of trading and live the dream of an ideal trade system that will always clearly indicate the direction of the market. But the problem is that such a system can not exist in principle. Each system has its own strengths and weaknesses. But none of them will indicate the direction of the trend always at the right time.

Therefore, the only solution is to use two components of successful trading: trading system and discipline.

 

What Forex is

May 7th, 2015

coins

Forex or foreign exchange, also known as the international currency market is exchange (trade) of foreign currency.
Forex is a global network that is connected by the most modern communications. It is a system that connects banks, insurance companies, investment funds, as well as brokerage firms and private investors. Their common feature is the use of mechanisms that allow to increase the capital, due to the movement of the main product of Forex – currency. Forex trader – is a businessman who has decided to make money on the movement of certain currencies,
or exchange between currencies.

History of Forex

If we look at the history of money, we can see that almost every currency in the past was due to a real commodity. The most widely used were metals, especially gold and silver, of which the were made coins that are known, from books and historical films, ” pay by gold”, “pay in silver”.
In Europe, till the end of the nineteenth century, most of coins were made from silver. Gold was used much less only on large payments.
How different currencies were exchanged? There were no exchangers like today’s banks or exchange offices.
The exchange rate between gold and silver, was mostly given to the will of the market, only occasionally it was adjusted by state. If there is certain rate, then inevitably there appear bimetallic system, and Mint was ready to exchange gold or silver for a certain number of coins of certain nominal and specified weight. Such way of exchange existed till the 19th century.

The nineteenth century – a new form of money

In the seventies of the 19th century is all around the world, including the United States, was transition to gold mono metallic standard, it means that law regulates only the price of gold. Gold is thus becoming a major precious metal, which is used to determine the value of individual currencies, and also as reference point for the exchange of currencies. The importance of relation between gold and money, significantly waned after World War I, due to the so-called gold standard, in which the government had obligation to exchange their money to gold or the foreign currency that can be exchanged for gold. At this moment, currency exchange took new form – there was no need to exchange currency for gold directly, it was possible to exchange one currency for another, if that currency was easily changed to gold. This was a major step in the exchange rates, in addition, as we know it today.
Further reduction of the role of gold in exchange rates comes at the end of the World War II, by Bretton Woods Agreement and the establishment of the International Monetary Fund. This agreement requires fix the price of the currency to gold only for U.S.A and only for external payments. In accordance with original Articles of Agreement, the international monetary system was based on a relatively fixed parities of currencies of different countries participants, and the guarantor of the system as a whole, was the U.S. dollar, secured by its gold content. It was a further important step in the mutual exchange of national currencies, as we know it today. The agreement put the end of British pounds domination and started the leadership of dollar. Later, in December of 1945, the Bretton Woods agreement was signed by the governments of 29 countries.

Last relation between gold and the currency was completely broken by President Richard Nixon.
In August 15, 1971 (for Forex really historic day) President Nixon refused the American obligation to sell gold for $35 per ounce. Then every county took “paper” standard as a constant system. It was the start of currency exchange system that exist today.

Start of FOREX

Forex or International Interbank Foreign Exchange (Worldwide Interbank Currency Exchange) was founded in 1971 and began function on the basis of fixed exchange rates of various currencies.
The first market participants (traders of foreign currency) were the central banks, multinational banks and large investment companies. However, in spite of everything, the world is still trust the U.S. dollar. This attitude led to the financial irresponsibility of individual countries, in particular Switzerland and Germany, were crowded huge amounts of U.S. dollars. The first in March 1973, the market was officially closed because of huge amount dollar sale offer, by agreement between the major market participants. Fixed exchange rate system simply collapsed. And a new era of international currency market (Forex) began.

Until recently past, the international foreign exchange market was not available to the masses of investors and traders, and private persons.
Minimum funding requirements (the most liquid standard lot is equal to U.S. $ 100 000) were too high for usual investors. But since then the situation has completely changed. Global political and economic changes have made possible to work on the market almost for everyone. Daily Forex turnover is about $ 1.5 trillion, and on some days it is more than 2.2 trillion dollars.

The path to the currency exchange market, in the form in which we know it today was not easy, it took a long development of currencies and the way they exchange. Today, however, the market of world currencies, is the most liquid market in the world and has more and more attention and popularity.

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