| The Foreign currency Exchange (FOREX) market is | | | | spite of how bloody and painful it is, when we must |
| the largest and most liquid financial market in the | | | | take profit we can not hate the profit is too small. |
| world. The average daily trade in the global FOREX | | | | Discipline is discipline, perhaps some smarties can win |
| markets exceeds US$1.9 trillion (Source: the Triennial | | | | a while, but only those people can keep obeying |
| Central Bank Survey of Foreign Exchange and | | | | discipline forever can win forever. |
| Derivatives Market Activity conducted by the Bank | | | | 8. Inconsistency. Long term or short term? buy or |
| for International Settlements (BIS) in April 2004, and | | | | sell? prosperity or depression? over bought or over |
| published in March 2005). These huge funds are | | | | sold? high or low? support level or resistance level? |
| traded by governments, banks, and large institutions. | | | | fundamental analysis or technical analysis? including |
| For comparison, the biggest stock market on the | | | | automated trading or manual trading? etc. There are |
| Earth - NYSE Group (The New York Stock | | | | too many inconsistent news, facts, information and |
| Exchange), has a daily trading volume of | | | | methods, strategies in Forex market, easily cause |
| approximately $86.8 billion (Source: NYSE Group, Inc. | | | | human traders make inconsistent judgments and |
| 2006). FOREX has a 18.4% average growth rate per | | | | decisions. And these inconsistencies will cause only |
| year since 1989. It offers trading 24 hours a day, | | | | one same result: failure! |
| five days a week, non-stop over Internet. This kind | | | | To overcome these terrible weaknesses of humans, |
| of massively liquid and long uninterrupted trading | | | | people have developed many methods. One of them |
| hours mean that under normal conditions there is no | | | | is called "Automated Trading". Automated (or |
| problem entering or exiting a trade. | | | | Automatic) Forex Trading means to trade Forex |
| But, in this huge market, as the story goes, at least | | | | (Foreign Currencies) using some trading systems, |
| 90% of new FOREX traders lose all their money | | | | programs, software or robots (on Metatrader MT4 |
| within their first 3 months of trading. Why? Most | | | | platform it is called as Expert Advisors - EA), without |
| losing traders who inquire about FOREX trading are | | | | needing a human to physically trade. An automated |
| quite intelligent, they just lack the right tools, the | | | | trading system is a group of specific rules and |
| "Secret Weapons" to win. They are not beaten by | | | | parameters, governing entry and exit points, having |
| other traders, they simply are beaten by themselves, | | | | the ability to both generate signals and execute |
| by humans' weaknesses. | | | | trades automatically. An EA is an automated trading |
| Talking about humans' weaknesses, let us list some | | | | "robot". Robots can beat human beings at chess |
| as follows: | | | | games, EA robots can beat humans at FOREX |
| 1. What is the first big weakness of human beings? if | | | | trading also. |
| I say it should be "greed", is there anybody will | | | | Programmers consider many components synthesize |
| disagree? Many times we have got 1% profit, but | | | | while they are developing an automated trading |
| we feel it is not fat enough. We want more, 2% or | | | | system or EA robot, including: Nature of Market, |
| 3% will be better. While the profit really goes to 3%, | | | | Math Modeling, Time Frame, Entry and Exit Signals, |
| we will think how about 10%? Not enough forever. | | | | Stop Loss Trigger, and Profit Target, etc. After the |
| But the market is so volatile, especially in Forex | | | | system is created, they do back testing and forward |
| market, we often encounter this depressive situation: | | | | testing rigorously both in demo and live accounts. A |
| profit turns into negative from positive. and this kind | | | | fully automatic trading system created like this way is |
| of depression happens again and again. | | | | able to analyze the market independently, work |
| 2. Fear. All people have fear. In Forex trading, | | | | completely on its own and constantly generate |
| currency rate is easily jumping or dropping hundreds | | | | signals, auto-execute in a trading platform. |
| of pips. Few of people can make sure how the | | | | Alternatively, programmers can design the system as |
| market will go. In Forex market, people all use | | | | a kind of 'semi-automated' whereby users can be |
| leverage to trade, from 50:1 to 500:1, leverage will | | | | alerted when the Entry, Exit, Stop Loss or Take |
| enlarge the profit or loss from 50 times to 500 times. | | | | Profit trigger occurs. Alerts can be audible through |
| Leverage is the wonderful feature of Forex, and it | | | | computer, sent to E-mail address or even sent as a |
| lead fear into people's heart too. If the market goes | | | | message to cell phone. Once the user confirms, the |
| against people, big drawdown comes, their fear | | | | robot will obey the order to finish the trade. |
| comes too. Is there anybody not scary to lose | | | | There are many advantages in Automated Forex |
| money? Under the pressure of fear, people easily | | | | Trading, such as: |
| and often make wrong decisions, stop loss too early, | | | | 1. Automated trading is executed by computer. |
| then regret soon. | | | | Today, computer science and information technology |
| 3. Lack of confidence. Seems better than fear, huh? | | | | have been developed to a very high level. Computer |
| But it is still not a good thing. Many times human | | | | can perform calculations thousands of times faster |
| traders are so happy once they see a little bit profit | | | | than humans, workout logical computations without |
| in their accounts. They are worrying what if the | | | | error and store memory at incredible speeds with |
| profit turns into loss? People always take a tiny profit | | | | flawless accuracy. |
| and run, then regret while they see the market goes | | | | 2. Taking the emotion out of trading. Unlike humans, |
| further and further along the right track. If they | | | | an automated trading system will never be misguided |
| were confident, they would have made ten times or | | | | by greed, fear, hesitation, and inconsistency. It just |
| even a hundred times of profit. | | | | trade mechanically (but fully programmable), |
| 4. Hesitation. Not only newbies, but also old-hands | | | | unaffected by a trader's psychology. It performs |
| easily hesitate to act in Forex market. You've | | | | based on the set criteria and disciplines. Obviously, |
| probably heard the saying "past performance does | | | | this reduces the risk of panic trading. |
| not predict future performance". Even a very | | | | 3. Automated trading can take trades day and night, |
| experienced trader who has made many successful | | | | non-stop, no weariness and negligence. EA robots |
| trades in his/her history, while he or she is facing a | | | | free their owners of the necessity of sticking in front |
| new situation, needs thinking twice before making a | | | | of the computer at all times. Once an effective |
| so simple decision: Buy or Sell? For new traders or | | | | system is developed and optimized, it can be left to |
| amateurs, they need longer time to think, and this | | | | run full automatically and independently. A successful |
| kind of hesitation always leads them to confusion and | | | | automated trading EA robot will allow its owner to |
| missing the best and fleeting chance. | | | | focus on optimizing strategies and money |
| 5. Weariness. How many people can keep working | | | | management rules rather than having to constantly |
| for 24 hours? No sleep, no rest? How about 48 | | | | watch the market. |
| hours, 72 hours, etc? Even an iron man can not use | | | | 4. Computer can run multiple programs simultaneously, |
| his eyes watching computer monitor, his brain thinking | | | | so we can use automatic trading EA robots to take |
| fast changing questions and his hands calculating | | | | multiple trades synchronously. That means we can |
| complex formulas, day and night, 24 hours a day, 6 | | | | include multiple conditional entries and exits, profit |
| days a week, non stop. Especially, no mistakes | | | | targets, protective stops, trailing stops, and more in |
| allowed! | | | | our strategies, and have them all automated at the |
| Nobody can! | | | | same time. This powerful function can help us to |
| None! | | | | maximize our return of investment, and reduce risk. |
| No doubt! | | | | 5. For day traders or other short term trading fans, |
| Don't mention the Super Man. He has weariness too. | | | | automated trading robots are very helpful tools to |
| 6. Negligence. Have you ever got trouble just | | | | deal with high frequency of trades using tick data. |
| because of a small negligence? such as took a wrong | | | | Day trading keeps traders exposed in market very |
| bus, missed an exit on highway, dialed a wrong | | | | shortly, so sometimes it is safer than long term |
| number, misunderstood boss' order, ignored a | | | | trading, but it is really difficult for a human to handle. |
| no-parking sign, omitted a whole page of questions in | | | | However, for automated trading EA robots , it is just |
| an examination, left resume at home while a vital | | | | a piece of cake. |
| interview, misspelled a keyword in a quote form for | | | | 6. No matter long or short term trading, Forex |
| a VIP customer, etc. Hi, man, when was the last time | | | | market always is volatile and waves fast, only |
| you forgot your mama's birthday, or worse, the | | | | automated trading can afford faster identification of |
| wife's, or the worst, girl friend's? Mama always | | | | signals and reaction to them. No doubt, computers will |
| forgive your negligence. Wife... well, it depends. Girl | | | | typically beat human beings in the speed of |
| friend? Huh, wish you good luck. | | | | identifying a trading signal and the entry and |
| But unfortunately, in Forex market, no one will | | | | execution of the corresponding orders. No more |
| forgive your negligence, even yourself. Any | | | | missing a trading opportunity. |
| negligence must be punished! You could get a margin | | | | Automated trading is not perfect yet, and EA robots |
| call, only pennies left in account, may just because a | | | | can not think instead of humans. If the programmer's |
| tiny negligence. | | | | skills are at a low level, or the strategy idea is |
| 7. Lack of discipline. Humans always think that we are | | | | untenable or nonlogical, the corresponding product will |
| smarter than machines. Sure we are. Not only we are | | | | not succeed. However, the practical experience |
| smarter, we have freedom too. But everything has | | | | shows that a high quality automated trading system |
| its nature, character, and rules. Rule means discipline. | | | | always guaranties some kind of financial success for |
| If we just feel smart and free in Forex trading, | | | | its owner working on Forex market. The latest fact |
| making decisions based on our feelings or knowledge | | | | is: in the Automated Trading Championship 2007, a |
| only, and ignore discipline, there will be endless | | | | world competition, all participants use EA robots, the |
| disasters waiting us ahead. Forex trading is like | | | | champion won 1204.75% profit, the runner-up won |
| fighting in war, soldiers can not survive in war without | | | | 450.42%, and the third place won 299.45%, just |
| discipline, neither can traders in Forex market. While | | | | within 12 weeks. |
| we have to stop loss we must cut off and run, in | | | | Isn't that amazing? |