By Yael Warman

It cannot be denied that automated forex trading has a highly suspicious reputation. Otherwise known as Robots, EAs or Expert Advisors and algo-trading, which is short for algorithmic trading, they all appear to offer the panacea to profitable trading.  The marketing pitch of the fully automated robot system does indeed go something along the lines of this, “If you buy our robot, you will take out all the stress of your trading by putting it all into autopilot. Sit back and watch the profits escalate in your trading account. Just install this incredible software into your trading platform and nothing more will be required from you”. See why there may be an aura of suspicion around Algo trading? The question is if this suspicion is firmly based in reality? We consider the actual pros and cons of what it offers and how it has changed the forex trading arena since its entry into the market.

In 2012 Professor Sir John Beddington, the Chief Science Advisor to Her Majesty’s Government, and a bunch of his colleagues compiled a report titled “The Future of Computer Trading in Financial Markets”, where he analyzed what the sector would look like 10 years later. He anticipated that if future growth was sustained and markets were open and reliant on decentralized technologies, then we could expect to look forward to some rather attractive benefits. A few of these being: financial global imbalances being resolved, increased financial market activity, contained EU deficits, further technological innovations, new platform products and interlinked global exchanges, just to name a few.

While this report is an international perspective that takes a look at the grand financial scheme, there are a number of practical benefits that algo trading brings to the narrower interests of Forex traders. Unlike a human brokerage service, an algo forex system will stay operational, day and night, as long as the markets are open and they have the means to take trade signals without much downtime. For a brokerage service it is certainly more cost-efficient to keep a robot operating, rather than hiring several traders to monitor movements and action decisions throughout the trading day.  These are cost savings, which more often than not, are passed onto traders.

If anything, Algo trading has had greater impact on institutional traders, rather than retail forex traders. Long gone are the days when you were reliant on making a phone call to a broker to execute a trade, since the advancement of online platforms that make participating in the market a matter of being just a few clicks away. The benefit in fact seems to be at the feet of retail traders, who from behind their own computer or mobile device have been given room to grow.

Boris Schlossberg from BKForex has pointed out in his blog titled “In FX -Pro Traders are Dying, Retail Traders Rising”, that robotic forex systems have been contributing towards making the market more efficient. Eliminating concerns of rate manipulation and collusion among investment bankers, whilst at the same time providing all people (no matter which desk they’re sitting at) with the correct price information. In effect, leveling the playing field of forex retail trading.

To date, the forex arena touches on $5.3 trillion a day in global currency trading volumes, with indications of it to expand well beyond this into the future. While 2016 has seen a number of road bumps, 2017 still looks as though it is set for a strong start with an increase in volatility, improved regulations and an ever growing supportive sentiment. Indicators that machines are yet to pick up on.

About the Author:

Yael Warman is a creative writer with a strong background in marketing and advertising. Yael has been a writer for over 10 years and has worked for clients in various industries as well as her own companies and is currently the Content Manager at Leverate.