Algorithmic and High Frequency Trading – The Future of FX Market Analysis?
Algorithmic Trading
Program, or algorithmic, is simply the use of computer programs to enter trading orders to the market, with the computer algorithm calculating such inputs as timing, price and the quantity of the order to be placed and this these systems are designed to operate without human intervention.
They can be long or short term but most are short term and look to make quick profits normally within a day. The logic behind them is that they can detect price discrepancies and profit from them and unlike a human there not subject to emotions and save the operator time as they run automatically.
High Frequency Trading HRT
The term High-Frequency Trading (HFT) basically means “trading with the system firmly focused on speed of execution”. A HFT systems can decide to take an execute and order in under a second and is being used by many institutions. The idea is to get the order in ahead of the crowd and take advantage of price discrepancies and make money from them. The idea is not only to execute orders quickly but in high volume, so that the system can liquidate the trade quickly. All trades are normally closed in minutes or hours and no position is normally held overnight.
Doesn’t it all sound so impressive and the future of trading?
Well as an experienced trader I would say that people have been trying to beat the market since trading started and no one has succeeded yet and the reason is obvious is markets don’t move to mathematical models and a computer cannot think it can only react. A computer can only react to change not anticipate it so a simple system will work better than a sophisticated algorithm – period.
New Names for Losing Forex Strategies
Algorithmic trading is just another word for robot trading which has lost its flavour a bit due to the huge amount of systems sold for public consumption with fake track records which lose money.
Even more ridiculous is high frequency Forex trading which places the emphasis on – orders in a nano second to beat the market and make quick profits. All this does is make sure the transaction costs are so high, that there is no chance of making money. Didn’t this used to be called scalping or day trading? Of course, these names are not flavour of the month either, due to the amount of systems which have been sold and lost money, so marketers have to find a new name to catch the public’s imagination.
Beating the market with a computer is nothing new and algorithmic and high frequency Forex trading, are just the latest hype which claim to beat the market but see users lose.
How to Win at Forex Trading
If you want to win at Forex trading, go the old fashioned route which makes money which is to learn the basics which are easy to learn and then think for yourself and you will be able to enjoy Forex trading success.
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