The Benefits of Algorithmic FX Trading

Using algorithmic formulas and software that automates and processes your trades for you have a definite edge over the human intervention approach where you spend time considering your position before making a trade. There are positives and negatives to consider but using algorithms should give you an advantage over more traditional fundamental and technical analysis. Automating your trades allows you the opportunity to manage a number of situations at one time, which if you were working manually, would either be too time consuming or might mean you missed out on potential profit.

Identify Trends

Algorithms are able to identify trends on a continual basis, so you can have a chance to stay ahead of the market and be monitoring certain events even when you are not at your desk.

A computer essentially never gets bored or tired of working and if used correctly, it can simplify your trading process and allow you to increase productivity. There is the initial capital outlay to consider in purchasing the software but if used in the right way, it will identify profitable trends quickly and allow you to take advantage of price movements.


It is in our DNA to express and feel emotion, but that is a human facet that can be problematic when it comes to trading markets. Your emotional state can quite easily lead to an erratic trading pattern and this is certainly an area where automated trading by your computer can hold a big advantage. Computers, thankfully, do not have emotions and neither do markets have any room for sentiment, so by using an algorithm you instantly eliminate one of the hardest aspects of trading for an investor to control.

Your trading software will simply execute a trade based on the rules you have defined without deviation or hesitation. You always remain in control of what your computer does on your behalf and it will not follow the herd if a price has gone beyond value or sell a position simply based on fear of a meltdown. Whatever parameters you have set, it will stick to them, simple as that.

Greater Liquidity

Computer software can process trades on an automated basis much faster and are more efficiently than we can manually. This faster turnaround can result in greater liquidity by using an algorithmic trading platform.

The theory is that as more traders adopt algorithmic-based trading systems, market volatility will decrease because all programs will try to execute trades in the most efficient manner. This will lead to tighter spreads and less overall volatility. In this situation, the best ways of profiting from the Forex markets will be by using a system that can analyze large volumes of data quickly, identify trends, and then make trades almost instantaneously.


Standardized third party black box software that does not give you the flexibility to adjust the software to your needs are slowly disappearing from the market. Their replacement, white box software, allows you to modify a system to your own preferences and style of trading.

If you do wish to develop a trading platform from scratch, you could consider buying a pre-packaged software system and then adjust the trading settings over a period of time to meet your specific requirements.

The flexibility of most of these programs, if used in the right way, will give you the opportunity to increase your potential profits and also reduce your exposure to risk.