Black box trading, or automated trading, is becoming more widespread, and the reason for this is that it allows anyone, even a new trader, to make market transactions that would have been otherwise impossible without these technologies. Not only is the technology becoming more affordable, but there are a lot of benefits that traders can get out of it, not the least being your trades are placed automatically in your account.
How to Get Into Automated Trading
The simplest and most effective method to get into auto trading is to use an existing system. This isn’t as simple as just copying of course as you also need to know how these systems function. If the idea of entrusting your funds to another person or a system makes you uncomfortable, learn as much as you can about it. Does the system work with ranges or trends? What kinds of strategies are in place, and are they for short, medium or long term? Just like with the stock market, you need to check the reward and risk ratio of each strategy, and the win rate as well. In other words, the more you know, the easier it will be to pick a forex automated strategy.
Essential Features of Trading Platforms
Automated trading systems should provide you with real-time and historical data that can help you assess strategies. With automated trading you should know each strategy’s profit and loss as well as other vital facts and figures like the risk/reward ratio, the loss/win percentage and intraday and max drawdowns. Black box trading will give you all the stats necessary to get some insights into each approach.
Modifying Strategies to Meet Your Needs
If you’re the type who likes to tinker with different strategies then this is the approach for you. Under this type of trading you take an existing system and make modifications until it suits your style and preferences. For instance, you may have found a forex strategy that generally suits your taste but you don’t like the limit levels imposed. Or perhaps the strategy uses a moving average that you’re not comfortable with and want to change it.
If this is how you want to trade, you’re in luck since there are a lot of web based trading platforms that provide such types of customizable strategies. Using this approach you can customize parameters like currency pairs, stop loss levels, indicators, timeframes and many others. These platforms also allow you to optimize and back test these strategies.
If you are an advanced trader you will probably want to develop your own strategy from scratch. There’s a reason why this is designed for advanced traders; it takes a lot of time and it can be difficult. But if you know a system that’s consistent, there’s no reason for you not to try it.
If you are going to use black box trading while customizing strategies, it is best to open a demo account (virtually all platforms allow this) so you can try out the different strategies. If the results are satisfactory, you can go live and start trading.