Forex Trading Algorithms and Indicator Basics

Forex trading and financial investments can make dreams come true in some cases where investors are able to realize nice returns on the sums that they put up. However, there is a myriad of different ways that one could be scammed if not careful, and so it is important to carefully research the various options and to choose wisely when deciding to risk some money. Basically, the FX market is all about trading currencies from one specific currency to another based on current values or futures, but people have to be careful.

One of the methods that is continuing to grow in popularity is the automated trading system that also goes by the acronym ATS. These computer programs use a predefined set of rules in order to submit orders automatically at various times as predetermined by the operator. One of the keys with this method is determining a strategy and the specific relevant rules to use as one tries to make a profit. Sometimes it can be as simple as taking and copying the strategy of someone else who has already gotten proven results. This is by far the easiest method because it just involves downloading or inputting the rules into the software one’s self. There can be some consistency here, but the historical performance needs to be verified. Something like the FXCM Mirror Trader platform might be a good route to take if a person wants to follow past successes.

There is another path that is more intermediate in difficulty, but it allows a person who is interested in understanding the various Forex knowledge to adjust some existing strategy to suit their particular tastes. The magic here lies in the indicators and signals that are used to setup the strategy. Some of these indicators are more reliable than others, and there is no one specific “best” out of all of them. It will depend on the risk tolerance and other factors of the investor.

Yet, it will all start with the most well-known of the indicators, and they generally are some of the easiest to grasp. For example, there is the simple moving average. The SMA looks at the currency over a certain time period and takes the average value over that span. Price movements can be looked at more in terms of the mean with the SMA, and that may help truly identify trends. The simple moving average is usually good for confirming a trend that one is interested in profiting off of, but it may not be the best for predicting such an upcoming trend.

Next, there is the exponential moving average or EMA. Here it depends on the days that are taken into consideration such that there are long-term EMAs and short-term EMAs. Various strategies can then take into consideration a couple moving averages and make trades when they cross or utilize other pertinent ideas. There are even some who advocate for a triple moving average strategy.

The moving average convergence/divergence indicator is a third type that goes by the shorthand MACD. Its primary purpose is to get a feel for momentum so that one can see if things are about to shift and take advantage. It is all about using the software to tinker with some of the various EMAs and their divergence so that signal lines can be put into place to know when to sell or buy.

The above is just the point of departure for those looking to get into Forex and make some solid decisions. With the proliferation of online sites ready to take that investment, just be sure to use a trusted provider that is backed by government regulations and it can be an exciting adventure.

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *