Foreign exchange autotrading

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Forex autotrading is a trading strategy where buy and sell orders are placed automatically based on an underlying system or program on the foreign exchange market. The buy or sell orders are sent out to be executed in the market when a certain set of criteria is met. Autotrading is a slang term for automated trading or an automated trading system.

Automated trading systems, or programs to form buy and sell, are used typically by active traders who enter and exit positions more frequently than the average investor. The set of criteria used in an automated trading system differ greatly, however they are mostly based on technical analysis.[1]


Forex autotrading originates at the emergence of online retail trading, since about 1999 when internet-based companies created retail forex platforms that provide a quick way for individuals to buy and sell on the forex spot market. Nevertheless, larger retail traders could autotrade Forex contracts at the Chicago Mercantile Exchange as early as in the 1970s.[citation needed]


The types of forex automated trading:

  • Fully automated or robotic forex trading: This is very similar to algorithmic trading or black-box trading, where a computer algorithm decides on aspects of the order such as the timing, price or quantity and initiates the order automatically. Users can only interfere by tweaking the technical parameters of the program; all other control is handed over to the program.[citation needed]


An automated trading environment can generate more trades per market than a human trader can handle and can replicate its actions across multiple markets and time frames. The sheer effectiveness of automated trading systems based on technical analysis in the field of foreign exchange trading was proven time and again by investment management companies such as Algorates, who’s Algorithmic Trading System predicted the Australian Dollar’s downward movement in May 2013, leading to substantial profits for their account holders. [2] An automated system is also unaffected by the psychological swings that human traders are prey to. This is particularly relevant when trading with a mechanical model, which is typically developed on the assumption that all the trade entries flagged will actually be taken in real time trading. [3]


As a decentralized and relatively unregulated market, it is extremely attractive to a number of Forex scams. Forex autotrading, as it brings Forex trading to the masses makes even more people susceptible to frauds. Bodies such as the National Futures Association and the U.S. Securities and Exchange Commission have issued warnings and rules to avoid fraudulent Forex trading behavior.

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