As technology has advanced, the formerly opaque Foreign Exchange (Forex) market is now more transparent than ever and transaction costs are only a fraction of their former level. Entirely new agents have joined the fray, including retail and high-frequency traders, while foreign exchange trading volumes have tripled.
The Rise of the Machines
A new wave of artificial intelligence is here transforming human life and there is little point in fighting against the tide. The nascent age of robotics is driving greater efficiency, increasing productivity, and improving the quality of services all at a reduced cost to consumers. Experts envision automation and intelligent digital agents will continue to permeate vast areas of our work and personal lives with huge implications for a range of industries, including the financial services industry.
Those who choose to take advantage of robotic trading systems can enjoy several benefits over stocks, including a significant reduction in the stress of trading. Rather than being pressed to continually assess a trade setup or open position and then take appropriate action, the trader’s role is instead reduced to monitoring a system that works for them. The computers algorithm handles all entries and stops, thereby taking much of the trading burden off the shoulders of the trader. Automating the money-management phase of a trade removes emotion from the equation and allows traders to follow a logical and statistically proven means to exit a trade and preserve capital.
Automation also drastically improves entry and exit efficiency as the orders are placed milliseconds after the trade setup is completed. This can be the difference in getting the desired fill, as it can obviously take longer to confirm and place the trade manually, especially if one reviews the setup multiple times just to confirm the trade is correct.
The performance of robots (algorithmic trading) is not always superior to that of humans. Computer programs cannot simulate all the mathematical algorithms that have been integrated into trading strategies. Further, trading robots generate many noises, reducing the percentage of profitable orders, and influencing trading performance. An effective robot should have a high percentage of funds return rather than numbers of profitable orders.
“Robots are only as smart as what you tell them to do.”
-Rudolf P. StroblFX & Project Management GmbH