This trading approach usually appeals to those who are looking to eliminate or reduce human emotional interference in making trade decisions. After all, buy or sell signals can be generated using a programmed set of instructions and can be executed right on your trading platform. Hold your horses, young padawan!

BLARE

Put your hard-earned cash back in your wallet and spend a little more time understanding algorithmic trading first. There are eight main kinds of algo trading based on the strategies used. Of course you can mix and match these strategies too, which yields so many possible combinations.

One of the simplest strategies is simply to follow market trends, with buy or sell orders generated based on a set of conditions fulfilled by technical indicators.

This strategy can also compare historical and current data in predicting whether trends are likely to continue or reverse. Black boxes that employ this strategy typically calculate an average asset price using historical data and takes trades in anticipation of the current price returning to the average price.

Well, this strategy can do it for you! A news-based algorithmic trading system is usually hooked to news wires, automatically generating trade signals depending on how actual data turns out in comparison to the market consensus or the previous data. More modern approaches are also capable of scanning social media networks to gauge currency biases.

Making use of arbitrage in algorithmic trading means that the system hunts for price imbalances across different markets and makes profits off those. Triangular arbitrage, which involves two currency pairs and a currency cross between the two, is also a popular strategy under this classification. As the name suggests, this kind of trading system operates at lightning-fast speeds, executing buy or sell signals and closing trades in a matter of milliseconds.

These typically use arbitrage or scalping strategies based on quick price fluctuations and involves high trading volumes. This is a strategy employed by large financial institutions who are very secretive about their forex positions.

Basics of Algorithmic Trading: Concepts and Examples | Investopedia

Instead of placing one huge long or short position with just one broker, they break up their trade into smaller positions and execute these under different brokers.

Their algorithm can even enable these smaller trade orders to be placed at different times to keep other market participants from finding out!

This way, financial institutions are able to execute trades under normal market conditions without sudden price fluctuations. If you think iceberging is sneaky, then the stealth strategy is even sneakier! Iceberging has been such a common practice in the past few years that hardcore market watchers were able to hack into this idea and come up with an algorithm to piece together these smaller orders and figure out if a large market player is behind all of it.

Do stay tuned for the next part of this series, as I plan to let you in on the latest developments and the future of algorithmic FX trading.

Nothing is particularly hard if you divide it into small jobs. We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders. We're also a community of traders that support each other on our daily trading journey.

Wendy Kirkland

BabyPips The beginner's guide to FX trading News Trading. How to Trade Forex Trading Quizzes Forex Glossary. November 12, 5: Partner Center Find a Broker. With a last name like Ninja, I decided long ago to specialize in espionage.

And with my first name being Forex, you guessed it, my other pasison was, well, anything and everything FX. Naturally, I decided to combine my two loves into one, "spying" on the forex industry which I call "espipionage.

I also profile existing companies that are making an impact on retail forex traders, all for your benefit.

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