The Realm of Automated Forex Trading System
Just how important is an automated system to the Forex trading system?
Before we answer that question, let us first determine how large the Forex trading market is. From there, we will know the importance of automated systems for the Forex market.
The Forex market is indeed the largest market around the world not just in terms of average daily turnover and average revenue per trader. It is also the largest market in terms of participants.
You name it, we’ve got it. Take a look at the following:
BANKS- they are not just for saving money and lending capital to entrepreneurs, but they are one of the major players in the Forex market. Banks cater both to large quantities of speculative trading and daily commercial turnover. Well-established banks can trade billions of dollars worth of foreign currencies every day. Some of the trades are undertaken on behalf of their clients, but most are through proprietary desks.
COMMERCIAL COMPANIES- these commercial companies trade small quantities of foreign currencies compared to larger banks and their trades produce small and short-term impacts on the market rates. However, the trade flows from transactions made by commercial companies aressentfactorsrsrs about the long-term direction of the exchange rate of a certain currency.
CENTRAL BANKS- central banks play an important function in the Forex market. They have control over the supply of different currencies, inflation, and interest rate. In addition, they have also official target rates for the currencies that they are handling. They are responsible for stabilizing the Forex market through the use of foreign exchange reserves. Their intervention in the market is enough to stabilize a certain currency.
INVESTMENT MANAGEMENT FIRMS- these firms commonly manage huge accounts on behalf of their clients such as endowments and pension funds. They are using the Forex market to facilitate transactions, specifically in foreign securities. For example, an investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.
RETAIL FX BROKERS- they handle a fraction of the total volume of the Forex market. A single retail Forex broker estimates retail volume of between 25 to 50 billion dollars each day, which is estimated to be at 2% of the total market volume.
SPECULATORS- these are individuals who purchase and sell foreign currencies and profit through fluctuations in their price as opposed to popular methods such as interest and dividends. They perform the important role of transferring the risk to individuals who do not wish to bear it.
In the Forex market alone, there are already six major players partaking in the $1.8 trillion worth of daily turnover. With a large number of Forex players, there is a need in switching from manual to automated Forex trading systems.
Among the aforementioned major Forex players, the automated trading system is of great advantage to speculators. Since they focus on the price fluctuations of various foreign currencies to profit, the real-time data analysis will help them determine trades that will give advantage to them.
There are several automated Forex trading systems available in the market. There are also automated Forex systems that are offered for free or as part of their trading account acquired from their Forex brokers or agents. Such complimentary system packages are typically elementary trading systems. Thus, if you are looking for more features, you can avail of them through additional payments.
There are two types of automated Forex trading systems. These are discussed in the following:
Desktop-based system- all Forex-related data are stored on your desktop’s hard drive. This system is unpopular to Forex traders because all data are susceptible to computer virus contamination and other security problems. Worse, when the computer malfunctions, all essential information might be lost and cannot be retrieved (unless you have some backup files of your own). However, it is a little expensive compared to the other types of automated trading systems.
Web-based system- the security of your Forex account and other data are provided by your web-based provider. These are hosted on secured servers. It is also convenient in the sense that there will be no software required and it is universally compatible with your Internet browser.
You may also try different automated trading system demos first so that you will be able to determine the automated Forex trading system that suits your personal preference and needs.
Even if you are just a small-time Forex player, it will be to your advantage if you will use an automated Forex trading system for your future trades.