Advantages and Future of Automated Forex Trading

Automated forex trading has limited practical use in today’s markets. Nonetheless, it can deal nicely with some routine trading tasks and off-hours trading.

Beneficial Applications of Automated Forex Trading

Automated forex trading is characterized by low profitability and an overall inherent instability, which prevents it from becoming more profitable. As soon as the user pushes for more profit, by changing the parameters, stability is lost. And ultimately, profitability is short lived once these parameters have been pushed too far. All in all, automated forex trading is no match for manual trading — not by a long short. There are however very specific online trading situations wherein such software-based trading provides a solution. These specific trading needs have to do with off-hours trading, and very strict criteria trades, both of which are too resource-intensive for a human trader to handle. Traders who use automation successfully, and in a stable way, are specialist traders. They do a lot of manual work, working through many charts and markets. And only a handful of limited periods of time are handed over to automated trading. The hard work has already been done prior to allowing the software to trade. The whole purpose of using this software, is to save time. Or to execute very specific trades, where contingent orders have to be of very specific size. Trading software can stand guard for many hours, and only execute the trade in question if and only if the strict criteria are met. This is often the case during major trend reversals and expected market moves. But beyond these applications, automation has failed to deliver superior results.

Automated Forex Trading
Quantum computing will definitely take many systems out of the stone age and into a new powerful future. Automated trading will surely be one of those. It is unlikely that it will help pattern recognition science beat the markets. Certainly it will not happen through any commercially available products. But we may see great possibilities whereby wise traders will set these systems in motion, and will only sporadically readjust parameters; All this in contrast to today’s primitive automated trading systems.

High Frequency Automated Forex Trading

High frequency automated forex trading is a more realistic possibility, but it still is in its infancy. Developers of any such successful and stable trading systems are unlikely to make them available for sale. Such high frequency trading still suffers from changes in market volatility. Which just like in the case of scalping end up causing very large losses when they happen. Day trading forex live through a high frequency, automated approach is a realistic possibility. Developers however lack the analytical skills required to model volatility and other risk factors, in a mathematical way. And as with all algorithms, if the theory is not correct the software end-product will not work well either. Software products such as forex robots are capable of winning forex trading competitions and producing large profits. But success is short-lived. And after several weeks the algorithm starts to fail miserably. And it even risks losing big money. If a forex robot was very good. And it only needed manual parameter adjustment about once a week, it could keep on working well. But this parameter adjustment would be so complicated and very few clients could possibly handle it. So is trading online made easy by automation? The answer is, YES, but only in very specific circumstances. Mathematicians on the other hand believe that the supercomputers of the future, relying on quantum processors, will generate impressive results. They will be able to run high frequency trading software much better. And parameters may only need to be occasionally tweaked, by data algorithmiscists.. These systems will still fail at some point, but they will have much longer winning streaks than today’s systems. It remains to be seen how the mathematics of pattern recognition will benefit from quantum computing.

Learning Online Currency Trading from Veteran Traders

Learning online currency trading is a very time consuming process. The learning curve can be cut shorter only through the guidance of some wise veteran traders.

Learning Online Currency Trading Based on Confidence

Learning online currency trading has to be based on confidence. Because too many negative thinkers will try to discourage you from pursuing your goals in trading. Trading is risky, and everyone has acquaintances who lost money trading. But very few know someone who made very good money trading in the forex market. That’s why so many negative thinkers exist. Confidence however can still be found among veteran traders, since these traders possess a demonstrated relevant skill set. And with an opportunity to see veteran traders in action, all doubts about trading viability recede. This proof that it is actually possible to beat the markets, dispels the negative thinkers are not absolutely right. Learning online currency trading becomes much more interesting when there is guidance provided by proven veterans. Any trading online course or seminar will be much more interesting to attend and learn from. Experience is priceless, and the mere guidance that veterans can provide is amazing. Even if they are not officially teaching, themselves. Official teaching by veteran traders is unlikely to contain their biggest trading tips. Especially seminars, which usually contain techniques and tips which address the whole picture of their trading strategy. Veterans will not share their best secrets, but even the tips they do share are still very valuable and insightful. All of these tips can be implemented on many markets, and on any currency trading account. Confidence is the most important personality trait of any trader in the making. It is important to be confident every day of the week, even during the worst phases of the learning curve, where many traders quit.

Learning Online Currency Trading
Many veteran traders are former floor traders, who worked here and there before finally becoming independent traders. They have a good understanding of swing point analysis, and of the daily charts on any market. Because all floor traders do a lot of homework on these charts before going on to trade.  Anyone who lasted for more than one year on the trading floor without blowing their account, is a veteran. Those having decades of experience are even more capable of beating the markets. So learning from these people is really priceless.

Learning Online Currency Trading Tips from the Veterans

Learning online currency trading tips from wise veterans directly, is a much better way to propel your trading ahead. Traders need to learn on two fronts. First on methods for identifying false signals and market moves. And secondly on identifying which elements of classic analysis do not really work, and to stop wasting time with them. By allocating more time on the techniques which do work, traders will end up reaching their objectives faster. The confidence gained in just a few profitable trades, based on correct judgment of the market, is really priceless. And this confidence encourages traders to continue their efforts, until the tipping point has been reached. Once past the tipping point successful trading becomes almost routine. There are losing and winning trades, but profits are bigger than losses. The fact that there are losing trades means that the trading strategy is a stable one (be suspicious of long winning streaks). And the fact that the trading account is profitable overall. Means that the strategy itself is viable, and profitable in the long run. CFD trading strategies can be cleverly integrated into any underlying strategy derived from the tips of the veterans too. The veterans may not be familiar with CFDs, but the tips work on the same markets. So combining these tips with the benefits of CFDs can bring new advantages into trading, which the veterans could never have dreamed of. Veterans however who are familiar with CFDs may have figured out even more creative trading methods. Especially veterans who have long experience as independent traders, not working as part of a team. These traders have secrets and tips which no one else has yet discovered.

Online Trading Accounts – Globalizing Market Opportunities

The emergence of online trading accounts in the 21st century’s second decade as the definitive marketplace for price determination is a profound development. Global citizenry has taken on a new meaning when the only requirement to participate in the ultimate commercial activity is a browser and an internet connection.Furthermore the nature of markets has evolved as advances in communication and computing technology have facilitated the rise of new trading platforms and modalities.

This article will review the relevant developments in general and how they have affected online trading accounts in the following countries:

Online Trading Accounts Development

As far back as 1969, with the establishment of the electronic communications networks (ECNs), digital trading systems became a reality for U.S. brokerages to in-house broadcast stock bid and ask prices. Over the following score of years as technology – particularly software – progressed, brokerage firms singularly and in association iteratively refined the process of matching share traders with current price data, thereby increasing the efficiency of of the buy – sell process and introducing dramatic matching up buyers with sellers easily and efficiently and with significant cost savings. Yet, the model and paradigm of client – broker – market principal remained unaltered.

With the dawn of the internet in the mid-1990’s the situation underwent dramatic transformation / democratization as smaller players, both brokers and investors, gained access to and ability to trade on the same information previously available only to market principals. As the technology permeated the marketplace, the number of online brokerages increased from 12 in 1994 to more than 140 by the end of 2000.

In parallel, the better market access for individuals spawned an entirely new career class, day traders, who introduced unprecedented levels of breadth, interest and volatility to the equity markets of the late ’90s, along with an unprecedented dozen-year bull run.

This steady and continual influx of investors into the stock purchases during the 1990s helped to create a very strong bull run (1988 through 2001). The mania pervading the dot com bubble was an additional element in the technology takeover.  All this interest and nascent technology and computing power encouraged new paradigms and disruptive processes.

UK trading account

While throughout their 200+ year competition, the New York Stock Exchange was more innovative than its London Stock Exchange (LSE) rival, at the dawn of the 21st century, LSE members began offering over-the-counter online trading accounts for Contracts for Demand (CFD) as a way for hedge funds and institutional traders to cost-effectively hedge their equity-risk exposure in a manner both leveraged and exempt for UK stamp duty tax.

Around 1998, CFDs became available to retail investors, providing all UK trading accounts with similar benefits.  Approximately a decade later, as a result of insider information cases, the UK Financial Services Authority (FSA) regulator imposed a CFD general disclosure regime. While CFDs on individual UK shares were the impetus for their creation, other financial asset instruments were also initiated and traded, like those on indices, many global stocks, commodities, bonds, and currencies. CFDs on indices of major exchanges quickly rose in volume to become the most popular.

Trading account Australia

In 2007 exchange-traded CFDs were launched in Australia, under the auspices of the Australian Securities Exchange(ASX). Trade began in the leading 50 Australian stocks, 8 Foreign Exchange pairs, global indices and a few commodities. What started with 12 brokers offering trading withered continuously until ASX cessation in June 2014.

The migration to off-exchange trade arose as proprietary platforms gained sophistication and liquidity, with bid-ask spread shrinking, innovative trading tools, and the increasingly robust internet-enabled features. The typical trading account Australia now features high end trading technology and a variety of asset classes.

Singapore trading account

The online trading experience in Singapore has also improved as the friendly pro-business environment, competitive instincts of the business community, and readiness to adopt new technologies has fostered a competitive non-nonsense trading regime.

“Virtual Singapore”, the online platform in which the unprecedented “Smart Nation” sensor big data is collected and analyzed, is an example of Singapore’s enlightened attitude to online data and cloud processing. The effort is expected to transcend the data silos which have typically limited reach and effect of other similar urban efforts to date.

Among the features found in a typical Singapore trading account are:

  • secure trading networks consisting of high end trading technology
  • comprehensive brokerage services for a broad range of traders and investors
  • instant deposit and withdrawals and outstanding customer service

Online trading South Africa

The online trading South Africa experience has mirrored the country’s political growth and maturation. Though a classic commodity-based currency, the South African Rand (ZAR) (18th most actively traded) still punches above the weight of South Africa’s economy (33rd largest), largely on the strength of the well-developed economy. Traders, largely in Johannesburg and Cape Town have come to expect tight spreads, the newest technologies, top tier liquidity, and first class 24/7-customer support. International, premium service available to retail and commercial clients include No-Dealing-Desk execution, spreads as low as .0 – 1 Pip and with less than 5 ms latency. Because of its long history at the margins of the British Empire, brokers and purveyors of platforms offer an array of tools, news and analysis so that clients can become familiar with the markets

Malaysia trading account

The Malaysian investment community, settled around the Kuala Lumpur Bursa Malaysia Stock Exchange has a well-developed legal structure and culture of trading securities, allowing it to evolve with markets and technologies. As such, online Malaysia trading accounts feature: quality Forex signals throughout the trading day, multiple platforms, innovative vision and technology, live chat support, low spreads, instant execution, no slippage and fast order processing

This summary has described the evolution of online trading accounts both technologically and in five specific countries. A review of the available features shows the effect of globalization in distributing benefits across borders.  Restrictions and limitations, at this moment of time when cloud computing and data storage dominate, have become a function of governmental restrictions either explicitly or through sanctions which support local brokerage services.

What is a Foreign Exchange Currency Swap?

A foreign exchange currency swap has two different definitions in finance. One applies to forex trading (also known as Rollover), the other applies to banking.

 Foreign Exchange Currency Swap (also known as Rollover)

The term foreign exchange currency swap, as defined in forex trading are the interest rate differentials which apply to all currency pairs. In the AUDJPY currency pair for example, this interest rate differential has been quite large in recent years as Australia had high interest rates and Japan had zero. If a forex trader goes long AUDJPY, they are being paid interest based on the Australian dollar interest rate, and they are being charged based on the Japanese Yen interest rate. If Australia has interest rates set at 4% and Japan has zero, the differential is exactly 4%. If the trader goes short on AUDJPY they will be charged at 4%. These differentials are the annual rates. Actual daily swap (rollover) charge or credit amounts are the daily equivalent amounts of the annual interest rate. This is calculated by the banks. And it is based on the number of business days in the year, not on the 365 calendar days. Swap credits and charges are very tiny, but when leverage is used, they become important to traders. This is how Carry trading works. Where traders attempt to profit from interest rate differentials over medium to long term trades in the forex market. The risk of the daily movement in the live forex rates is much much greater than the risk-reward potential of the interest rate differentials. So much so, that price movements in the exchange rate dwarf the potential of the Carry trade by far! Nonetheless, wise forex Carry traders study their forex charts closely and hedge price movement risk. And they do it using another correlated currency pair having a smaller interest rate differential — or through related commodities and through CFD trading. Swap rates are only of concern to Carry traders, and they can help achieve very profitable trades, as long as market price risk is hedged properly. The foreign exchange currency swap is also important in other more complicated forex trades, where hedging of risk through arbitrage is desired.

foreign exchange currency swap
A swap agreement in banking is a totally different thing. It’s about one foreign bank getting loans at better rates, through the local, better credit rating of the other bank. And interest rates are fixed.

Foreign Exchange Currency Swap in Banking

A foreign exchange currency swap in the banking industry is an agreement which enables two different banks to get a better borrowing interest rate. The two banks involved are based in different countries and hence currency zones. Because of the fact that credit rating agencies in every country tends to rate local banks as more trustworthy and more likely to repay their loans. And as a result, a domestic bank will always get a lower borrowing interest rate compared to a foreign bank. In a swap agreement, for example between a German and a US bank, both banks are able to borrow through each other, through each other’s local, better credit rating, resulting in a better deal for both. The swap agreement involves amounts of capital denominated in local currency and fixed forex exchange rates. So effectively, the US bank in our example ends up borrowing the Euros in needs, to finance its operations in Germany, at a lower interest rate, as opposed to borrowing directly as a foreign bank. The French bank does the same, and gets the US dollars it needs to finance its operations in its US-based subsidiary companies. Ultimately, the overall default risk is also reduced for both parties involved in a swap agreement.

In carry trade strategies it is important to learn currency trading basics, such as pip value and swap value. Because the carry forex trader is concerned with making a profit through interest rate differentials, while hedging price movement risk. In fact all success is determine in hedging movement risk, which can be from somewhat difficult to extremely complicated. But it can be done, and of great interest are commodity currencies because price movement risk can be hedged through exposure to the underlying commodity. In all cases traders do better when the take time to learn currency trading basics, because this is the only way to get the calculations right and avoid costly mistakes later on. Carry trading is interesting, flexible, and ca be combined with directional forex trading as well. There are no limits to how far a carry trader can go to evaluate and control risk in their portfolio.

Useful Forex Trading Tips for Beginners

Forex trading tips for beginners range from simple ones, to more complicated ones, depending on the strategy used. Beginner traders can put these to the test.

Good Forex Trading Tips for Beginners Don’t Have to be Too Complicated

Useful forex trading tips for beginners tend to focus on money management, risk control and making use of simple indicators. Most of these tips however are presented with inadequate information. Traders often have questions about these tips, and using them in actual trading is never straightforward. Some good forex trading tips for beginners focus on picking entry points in the market. And traders find that much more exciting that money management tips, yet they are both important. Traders who manage to learn forex trading well, and advance their techniques, tend to twist and modify all of these tips. Using any tip, in its rudimentary form alone, is not of much help in real trading. Then, there is a whole category of trading tips, which many naive beginners follow, and all of these tips are wrong. The use of tight stops for example, is a totally misleading and wrong tip. This is because this old and wrong trading tip fails to deal with probabilities of certain events occurring. Backtesting of trading tips is difficult, if not impossible. Though the one on using tight stops is an exception, it’s easy to figure out that tight stops do not really provide any meaningful protection in actual trading.

Forex Trading Tips for Beginners
New traders must develop intuition and differentiate between bad and good tips. But also examine other old, confusing tips, and see how to make the best out of them.

Some of the Best Forex Trading Tips for Beginners

Some of the best forex trading tips for beginners are the use of LSS weekly and daily pivots, and the use of the Value Area. The Value Area is more for day traders, whereas the LSS extends out to any time frame, so that even position and full swing traders can use it. Any good forex trading course will probably teach LSS pivot theory and use, to some depth. And if the entire range of forex training provided in that course is extensive enough, it will debunk many bad tips as well. Generally speaking, beginners can achieve good trading relatively fast. But they have to deal with psychological pressures, fear, and be bold enough to bend or even break established trading rules. Most of these rules and tips, are either right or wrong, depending on how they are used. The LSS pivot theory and Value Area prize zone, are two concepts whose way of using is not rigorously defined. Both of these concepts are used to figure out support and resistance levels in the market. And they can still be confusing, because even though price moves beyond a pivot level, and the support becomes resistance (or vice versa). That price breakout beyond the pivot level is a signal that will be good for a finite amount of time only. May be for as little as 30 minutes. Beginners traders need to realize that if the trading day in question is bound to be a sideways day, then all these pivots will have time-limited impact. And when a pivot is no longer relevant, it can be breached again, possibly invalidating the previous signal. Price however does move a lot between pivots, even on sideways days. So much so that traders can make good profits and good use of their trading time.