Automated Trading in the FX World

Daniel L
Category:  Trading Articles
With over eighty percent of trading being automated, retail traders face a harsh environment when entering the competitive world of currency trading.
Since the Personal Computer (PC) appeared in the late 1970’s, it disrupted many industries. The trading industry was just another one down the line.
At first, traders spotted the opportunity to use the newly discovered computing power in technical analysis. Suddenly, analyzing hundreds or more of days or weeks of data was easier.
The more powerful computers became, the more they affected the trading industry. In an almost logical move, they started taking more demanding tasks, as traders began to program them to buy and sell directly in the interbank market.
Nowadays, roles changed. Humans follow robots, as supercomputers are responsible for the most significant volume in the day-to-day currency trading market.

High-Frequency Trading

To start from the apparent game-changer in the 21st-century trading industry, supercomputers drive the price action. When the market ranges ahead of important data, the HFT industry makes sure levels remain in place, as they trade for tiny ranges.
The primary use of the HFT industry is to profit from small market moves, even on the ninth digit of a currency pair’s quotation.
Supercomputers in the industry buy and sell thousands or more trades per second. As such, they’re responsible for most of the trading volume, and all buying and selling is automated, based on the strategies programmed by the quant industry.

Pending Orders in the Retail Arena

Not only the HFT is automated. On a closer look to the industry, the retail trading uses pending orders too. Those are automated within the trading platform and activated if specific market conditions are met.
Every trade has an entry, take profit and a stop loss. Or, at least this is what it should have.
The take profit and the stop loss are automated orders. If the market moves towards the right direction, it’ll hit the take profit level, and the platform will buy or sell to square the initial position. Automatically!
The entry, on the other hand, can be at the market (at the current market prices) or at future levels. When entering at future market levels, traders use:
  • buy stop orders to go long from higher than the current market
  • sell stop orders to sell from lower levels
  • limit orders to buy from lower levels
  • sell limit orders to sell from higher levels
On top of those, different trading platforms offer orders like one-cancel-others or trailing stops. Both, obviously, automated.

Trading with a Robot

Recent years saw the retail trading market following the steps of the HFT industry. More and more retail traders started to program their own robots or trading algorithms and run them on the interbank market.
The trend is barely started as retail traders gain access to more sophisticated computers.


Considering that the size of the retail trading in the overall daily FX volume is only five or six percent, combining the use of the pending orders with the expert advisors and trading algorithms, it means that most of the retail trading is automated too.
Hence, the HFT coupled with the retail market depends on computers for proper execution and profitability. Does it mean that the human touch disappeared from Forex trading?
Definitely not. For as long as humans still program computers, fear and greed will dominate markets. Only that the battle will take place between programmed computers, and not manual traders. 
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