How important is an automated system for a forex trading system?
Before answering this question, let's first define the size of the forex trading market. From there we will know the importance of automated systems to the forex market.
It is true that the forex market is not only the largest market in the world in terms of average daily trading volume and average income per trader. It is also the largest market in terms of the number of participants.
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Banks: Not only do they provide money and lend capital to entrepreneurs, but they are also one of the major players in the foreign exchange market. Banks serve a variety of speculative transactions and daily turnover. Established banks can trade billions of dollars in currencies every day. Some operations are performed on behalf of their clients, but most are conducted from their own offices.
Trading companies: These trading companies trade in small amounts of foreign currency compared to larger banks and their transactions have little and short-term impact on market rates. However, the trade flows of transactions made by trading firms are important factors in terms of the long-term trend of the exchange rate of a particular currency.
Central Banks: Central banks play an important role in the foreign exchange market. You control the supply of different currencies, inflation and interest rates. In addition, they also have official target rates for the currencies they manage. They are responsible for the stability of the forex market through the use of foreign exchange reserves. Their intervention in the market is sufficient to stabilize a particular currency.
Investment management firms: These firms typically manage large accounts on behalf of their clients, such as wealth and pension funds. They use the forex market to facilitate transactions, particularly in foreign securities. For example, an investment manager with a portfolio of international stocks must buy and sell various currency pairs to pay for purchases of foreign securities.
Retail Brokers: Dealing with a fraction of the total volume of the forex market. An individual forex broker estimates retail volume between $25 billion and $50 billion per day, which is an estimated 2% of the total market size.
Speculators: These are people who buy and sell currencies and make a profit through price fluctuations, as opposed to more common methods such as interest and dividends. They perform the important function of transmitting risk to people who are unwilling to take it.
In the forex market alone, six major players already participate in the daily turnover of $1.8 trillion. With so many forex players, there really is a need to switch from a manual forex trading system to an automated one.
Among the major forex players mentioned above, the automated trading system is a huge advantage for the scalpers. Since they focus on the fluctuations of different forex rates to make profits, real-time data analysis helps them decide which trades will give them an edge.
There are many automated forex trading systems in the market. There are also automated forex systems that are offered for free or that are purchased as part of your trading account with forex brokers or agents. These additional system packages are usually commercial starter systems. So if you are looking for more features then you can get them by making additional payments.
There are two types of automated forex trading systems. These are discussed below:
Desktop Based System: All forex related data is stored on your desktop hard drive. This system is not popular with forex traders as all data is vulnerable to contamination from computer viruses and other security issues. Even worse, if your computer fails, all important information can be lost and cannot be recovered (unless you have your backup files). However, it is a bit expensive compared to other types of automated trading systems.
Web-based system: The security of your forex account and other data is provided by your web provider. These are hosted on secure servers. It is also convenient in the sense that no software is required and is universal