The use of the best Algo trading software has tremendously revolutionized the forex market, having a huge daily turnover. It never has been about automation or speed, as humans fail to see the opportunity hidden behind the trading. The trading profitability has been reshaped by the best algo trading software owing to its zero bias, highest speeds of execution, and high frequency trading (HFT) for traders. Hence, let’s dive into the interesting topic of algo trading for forex to achieve exceptional outcomes for traders.
Forex Algorithmic Trading
Algo trading is defined as a process of using a compute program to create and set various algo trading strategies & rules using a computer program based on historical data. It has multifarious benefits like the elimination of human bias in trading, milliseconds execution time, HFT, and disciplined trading not possible manually. All such algo trading programs run on rules as per a mathematical model, price, or timing, steering a fresh decade of precision trading in forex.
Algorithmic Trading In Reality
Practically speaking, you can imagine a programmed algorithm trading software:
- Buys USD /EURO at a time when its 100-day moving mean breaches the 200-day moving average.
- Sells at a time when the opposite situations arise.
Moreover, the programs track all the price trends and complete order execution even without the intervention of humans, showing the robustness of rule-based and automated trading.
Benefits Of Algorithmic Trading
Forex traders can draw many benefits from algo trading, such as:
- Placing of trades at the most favorable price
- Immediate or high-speed trade execution
- Removal of psychological and emotional factors
- Decreased cost of transactions.
- Reduction of manual errors
- Impactful backtesting for validating of trading strategy
- Elimination of high losses
- Scaling of trades
- Undertaking HFT at high volumes
All such benefits have resulted in common adoption amongst retail and institutional trades equally.
Real-World Instances of Successful Algorithmic Trading
- Renaissance technology model
Mathematician James Simon set up the Renaissance Technologies formulated the medallion fund. The fund gave an average of 66% annualized profits from 1988 to 2018. It finds market inefficiencies using machine learning algorithms and advanced mathematical models to execute thousands of trades within microseconds.
- Turtle traders experiment- trend following
William Eckhardt started training novices in the 1980s under the nickname of turtles to trade successfully through an algorithm strategy that was well-structured. Such an experimental trading strategy proved that:
- Anyone can get profits from trading irrespective of their expertise by sticking to a rules-based and strict system
- The system focused on capitalizing and finding long-term trends forms its basis.
- Retail algo trading by Algozini
Algozini has successfully pioneered retail best algo trading software, augmented with online training on its flagship API bridge software as a webinar. This software can sync with TradingView and allow trade execution right from its dashboard of api bridge.
Key Algorithmic Trading Strategies In Forex
Trend-following algo trading strategy to ride market momentum –
It uses indicators like Bollinger bands and moving averages to capitalize on sustained market momentum. It entails the common method of 200-day & 50-day moving averages to know the market trend and then completes sell/buy orders automatically.
Arbitrage trading
It helps traders explore the market inefficiencies using any slight price differences throughout different platforms or markets. For instance, on broker A, you buy EUR /USD at 1.5000, whereas you sell it on another broker firm B at 1.5002, making a secure profit. Therefore, only algo trading software can help you to execute the trading in such a short time efficiently.
Sentiment-based trading.
It leverages the power of the psychology of markets. It simply scans and evaluates social media posts, economic reports, and news headlines to study and determine the market psychology. Then, algorithms surf through textual data to find bearish or bullish sentiments. Then it executes the trading as per the existing market sentiment.
Mean reversion
It has its basis on trading on two far ends market. It assumes that market prices ultimately come back to their historical average. Then it utilizes Bollinger bands and RSI indicators to know the oversold or overbought conditions. Hence, the traders trade accordingly to get profits to the mean.
Choosing The Right Algorithmic Trading Strategy
Every algorithmic strategy performs a distinct purpose as per trading objectives and market situation, as listed below:
- Mean reversion strategy centers on short-term price movements in range-based markets.
- Sentiment-based trading uses news analysis by AI to forecast price shifts.
- Trend following can be used by traders wanting to capitalize on market movements and ride them.
- Arbitrage exploits ad hoc price differences for high-speed and low-risk executions of trades.
Technical Requirements for Algorithmic Trading
Now, let us understand the basic requirements of doing algo trading in forex:
- Try to gain a bit of knowledge of programming to handle it, but don’t worry, Algozini has the best code-free algo trading software.
- Have access to Amibroker and API bridge
- Get hands-on availability of market data
- Method of backtesting systems
- Historical data for strategy backtesting
Final Verdict – Investment In Best Algo Trading Software Is Profitable
Many have earned millions of profits using algo trading in forex. So why are you waiting join us in this successful journey through our free online training cum webinar of algo trading using API bridge.
Article by-
Khalid Ahmed
(Finance Content Writer- Algozini)
