Is automated Forex trading profitable? The short answer is yes and no. As with all matters related to Forex trading, it is more complex than it appears. I will explain under which conditions automated Forex trading is profitable and what to avoid, as the sector is ripe with scams and misinformation, leading to confusion among retail traders.
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Automated Trading Systems: An Introduction
Over 80% of the daily Forex trading volume, which approaches $8 trillion daily, comes from algorithmic trading solutions, and the number continues to increase, but is automated Forex trading profitable?
The best automated Forex trading platforms can yield consistent profits if:
- Forex traders code strategies with a proven track record
- Forex traders have multiple strategies to use in various market conditions
- Forex traders have a sophisticated algorithmic trading solution that can accurately decide which strategy to use when
Automated trading requires knowledge of a diverse array of strategies, powerful software, a trading platform that supports API trading, and experience coding in that language or access to trusted developers who will code with bulletproof NDAs and employment contracts. For example, MT4 uses the MQL4 programming language, while cTrader uses C#, but with APIs, developers can use their preferred programming language and connect to the trading platform.
AT and EA, What’s the Difference?
AT stands for automated trading, and EA for expert advisor, but what is the difference, or are they identical?
Automated trading refers to anything related to algorithmic or automated trading and is a broad-based term. An expert advisor is specific to the MT4/MT5 trading platforms, referencing algorithmic trading solutions that traders can utilize.
MT4 is the leading algorithmic Forex trading platform, and most traders use the terms automated trading and EA synonymously, but is automated Forex trading profitable? The profitability depends 100% on which algorithmic trading strategies are used and the developers who coded them.
Automated Forex Trading Pros & Cons
As part of answering the “is automated Forex trading profitable,” question, traders must also understand the pros and cons of automated Forex trading. It will ensure they can make an informed decision on the topic and help them implement it as their core portfolio strategy.
The Pros of Automated Forex Trading
- Removes emotions from the decision and trading process
- Allows the analysis of the entire Forex market in a few seconds at the most
- Increases trade execution
- Ensures efficient Forex trading
- Enables deployment of complex strategies
- Offers 24/5 trade monitoring and risk management
- VPS hosting for 24/5 low-latency Forex trading
The Cons of Automated Forex Trading
- Third-party solutions do not work
- The automated trading sector is littered with scams and frauds
- Most traders only have one strategy, which may have taken years to develop. Automated trading solutions with one strategy fail to adapt to changing market conditions
- Most brokers fail to support algorithmic traders with low trading fees and ultra-fast order execution
Bottom Line: Is Automated Forex Trading Profitable?
With 80%+ of daily Forex trading algorithmic, automated trading is necessary for efficient and effective trading, but is automated Forex trading profitable? For most Forex traders, the answer is no, as third-party automated trading solutions do not work. Most algorithmic trading solutions are well-guarded, secretive systems deployed by quantitative trading firms, hedge funds, and high-frequency trading firms. Individual traders with a profitable automated trading system will equally guard its algorithms, as it ensures they maintain a competitive edge.
Forex trading, despite popular belief, is not a social activity. The more traders crowd a trade, the less profitable automated trading systems become, while the risks increase.
