Manual Forex trading is a time-tested and market proven way of trading Forex. There is no doubt that manual Forex trading is here to remain. Many of the most skilled full-time Forex traders prefer this method. The important thing words here are skilled full-time traders.
You see, manual Forex trading could be time consuming. While the process of Forex technical analysis gets a bit easier and much more efficient with practice in manual Forex trading it can never be totally eliminated. Manual Forex traders will always need to complete their technical as well as perhaps even fundamental analysis prior to executing their Forex trades.
As you understand, fundamental Forex analysis has to do with looking at economic indicators inside and between nations. Fundamental Forex indicators such as Consumer Price Index, Non-Farm Payroll, Major National Product, Industrial Production, Producer Price Index, Retail Sales, Balance of Payments and Interest Rates are some of the most common fundamental Forex indicators traders seek to incorporate in their analysis.
Obviously using both fundamental and technical analysis is quite complex and can be considered a very time consuming challenge. Except for "news" traders many Forex traders default in order to primarily using Forex technical analysis.
A prime example of "news" is the actual Non Farm Payroll announcement. This announcement normally takes place on the first Friday of every month at 8: 30am Eastern Time. Forex traders who trade the news position themselves on the market to capture as many PIP's as possible during the market corrections that occur just after a "news" release. Forex traders who trade the news rely a great deal on fundamental indicators in making their trade decisions.
New Forex software programs that gather and interpret Forex fundamental indicators have been around for some time and they will continue to improve their accuracy with time.
Speaking of Forex software packages, one of the most rapidly developing forms of Forex software are "Expert Advisors". Forex Expert Advisors (EA's for short) are software packages that operate within your Forex trading platform. So far, the industry leading Forex currency trading platform for EA's is the Metatrader 4 Trading Platform designed by ODL Investments.
There are several advantages to using an EA. Perhaps chief among these advantages is the fact that the "on-board" programming from the EA eliminates the need for the Forex trader to spend considerable time doing technical analysis. Once an EA is properly initiated, it will instantly trade a specified Forex pair, or pairs, using a predetermined strategy or Forex currency trading approach.
This can be a huge time-saver.
With an EA the Forex technical analysis is handled through the Forex trading logic programmed into the EA. The EA functions off of some predetermined "rules" which guide its operation. The EA enters the Forex trade once the entry conditions are met and exits the Forex trade when the leave conditions are met. Each EA has a different set of predetermined guidelines. Each rule is typically controlled by one or more user adjustable "switches". These switches are optimized at that time the EA is delivered to the user and can be saved like a switch settings profile. Once the default switch settings are saved, the user could make changes to the switch settings if they wish. It is important to remember that the easiest method to determine EA switch settings is through the back testing process.
Back testing is really a process by which each switch or set of switches are methodically tested using actual past market data out of your Forex trading platform. While back testing takes much less time than forward testing it is still a painstaking and time consuming process but the results can be quite revealing and informative. This process will tell you such things as, for instance, which time frame(s) and currency pair(s) are the most profitable to industry.
Back testing is absolutely necessary in order to optimize the settings for an EA and therefore it is very valuable process but the process is not perfect. Data mismatches may appear during the back test process which can degrade the results somewhat. The source of these data mismatches is not known at the moment but it is an industry wide problem and the solution to the mismatch problem has been vigorously pursued.
Even with its flaws the back test process remains of utmost importance with regards to optimizing the performance of any EA.
The time saving nature of using an EA coupled with the stress reducing effect it has on the Forex trader has boosted the popularity of this sort of Forex trade automation.
It is just this kind of Forex trade automation that's helping to fuel the explosive growth of the retail Forex market. It's no longer necessary to stay glued to your computer monitor and "baby sit" your own Forex trades. Not only that but a properly designed EA can perform functions that even probably the most skilled and experienced Forex traders find difficult. For example, there are EA's currently available that can trade multiple currency pairs simultaneously. Other EA's can trade multiple Forex hedge trades simultaneously!
We are in the midst of a quiet revolution toward increased Forex trading automation. It is safe to say that the trend toward Forex trade atomization will probably continue and strengthen over the next several years. Because the advantages of utilizing an EA outweigh the disadvantages, the popularity of using EA's is at an all time high and likely to set new records soon.
Even though EA's are reducing the need for Forex technical analysis they're not reducing the importance of self-control and discipline. It is common for Forex traders who are new to EA trading to have urge to "manual" trade using the EA. This is a mistake, to begin with it defeats the purpose of the EA and second it can lead to preventable loses.
With EA trading the EA is your Forex trading technique. The EA trader is well advised to allow the EA to do its work without attempting to manually over-ride it (Plan your trade - trade your plan).
If feasible, examine the back testing and forward testing results of an EA before you decide to purchase it. Always demo trade with a new EA to confirm its operation before utilizing it in a live account.
EA trading is gaining in popularity by jumps and bounds. EA trading is part of a major trend toward increased automation on the planet of Forex. This trend is expected to expand and strengthen in the actual years ahead.
Being skilled in Forex technical analysis is always an asset but EA trading relies more about the Forex trading logic of the EA than it does the technical skill from the trader.
Self control and discipline are equally important whether you are Foreign exchange manual trading or EA
trading. Combine the personal qualities self control and discipline with using a well designed EA and you are on the way to profiting in Forex - the world's largest market.
Disclaimer - This short article is for educational purposes only. It is not offered as investment or legal counsel. The reader assumes all responsibility for any and all profits or losses incurred by his / her trading activities.