Today I’m going to reveal 5 easy steps to create an automated trading system.Without wasting any time,
Let’s dive right in-
An automated Forex trading system executes transactions on your behalf using the exact parameters you have defined and that reduces a lot of effort.
Learn how to create, analyze and run an automated Forex trading system for best trading platforms, including MetaTrader4 (MT4) and FIX API Trading.
What is a Forex trading system?
A forex trading system is essentially a set of rules used to execute transactions on one or more currency pairs.
Although these systems can be implemented manually, many traders use automated systems – based on computer code – to reduce the emotions of the equation and execute transactions more efficiently.
These automated systems are actually “trading robots” that can monitor markets at any time of the day, search for opportunities, and execute transactions according to a predefined script.
Create or buy an automated Forex trading system
You can create an automated Forex trading system for many platforms offered by SGT Markets, including MetaTrader 4 (MT4), FIX API.
It is also possible to purchase and install pre-built systems manufactured by a third party.
Build a custom system
The principal benefit of creating a custom system is that the options are virtually limitless – the only constraints being your imagination and what can be coded.And that’s something you should DEFINITELY be doing.
However, building a automated system will require a thorough understanding of financial markets, trading and technical analysis.
You will also need to convert your system through code, although it is possible to hire a developer once you have designed the system on paper.
Buy an off-the-shelf solution
If you use MT4 or FIX API, you also have the option to purchase a ready-to-use solution, called ‘Expert Advisor’ (EA) on MT4 and an ‘automated trading strategy’ on FIX API and that is HUGE.
While it is much easier to use one of these systems than to code a strategy from scratch, it is important to research and thoroughly test any third-party solution to ensure that it fits your business goals.
And do what she says. This is because many third-party solutions make bold statements – like being the “best forex trading system” – but fail to keep up with the hype.
How to build an automated Forex trading system
If you have decided to create your own automated Forex trading system, here’s how:
Create a business plan
To make the most of your time in the markets, it’s a good idea to create a detailed trading plan – a template for your trading activity that can help you define your goals and how your automated system will help you to achieve.
- Among other factors, it is useful to take into account:
- Which market (or which markets) do you want your system to trade?
- When you want it to work
- What should be his risk / reward ratio?
- What strategy will he use
Design your system
Once you have decided what you want your system to do, the next step is to determine how to achieve that goal.
In particular, it is important to consider how your system will identify business opportunities and what you want it to do when it finds one.
He could place transactions on your behalf or simply send you an alert.
When designing your system, it may be helpful to think about the tools and indicators you normally use to identify trends (such as ROI and moving averages) and how you decide to place transactions.
Keep in mind that most automated trading systems are based on technical analysis rather than fundamental analysis.
Therefore, a good knowledge of this area and how it can inform your trading is essential.
Choose risk management tools
The most important part of designing your system is deciding which risk management tools to use. So important, in fact, we have included it here separately. With SGT Markets.
You will have access to three types of maximum stop, depending on the platform you use:
A basic stop closes your position as close as possible to the price level you specify. This can sometimes be at a price that is worse than the price charged if the market is changing rapidly or if there are “gaps”
A guaranteed stop always closes your position to the level you specify. You will pay a small premium if the stop is triggered
A trailing stop follows positive price movements to guarantee profits. Again, the stop level is not guaranteed, so it could slip if the market moved quickly
You can also use a limit to automatically close a transaction if the price goes to a more favorable level. Unlike a stop, if a limit is triggered and filled, it will be at the price you chose or better.
Build your automated Forex trading system
Once you have designed your system on paper, the next step is to convert it to code. Each platform uses a different coding language,
so you need to design your system for the specific platform you plan to use.
While it is useful to understand what can be coded, it is not necessary to have a thorough knowledge of programming on your own.
Indeed, it is always possible to use a developer to create your system for you. To learn more about how to find and hire a developer, contact our technical support team.
Backtest and refine your automated Forex trading system
The final step is to test your trading system with historical data and pluck it to get the desired metrics, such as a high percentage of winning trades or a low draw.
This is a very important step – whether you have chosen to purchase a standard system or build your own system – as this will give you a fair idea of the likely performance of the system without putting your capital at risk.
However, if backtesting is a useful way to measure the effectiveness of your system, it has limitations.
Static data is not always representative of what will happen in a live market situation, as it may not take into account factors such as liquidity.
Run your trading system
After you set up and optimize your system, it’s time to implement it. However, ‘automation’ does not mean you can just walk from your computer.
You must always keep an eye on what happens if there are unexpected problems or changing market conditions, even the best automated trading systems will have some drawbacks or strangeness.
Moreover, they generally ‘make decisions’ based on technical analysis alone, so they may not be ready to assess the effects of economic events or other market conditions – factors that can be considered by human traders as part of their fundamental analysis.
And I hope these 5 steps will be helpful for you. Now I’d love to hear what you think about my opinions.