Importance of Technological Innovation in Forex Trading
Forex trading is a popular method to generate a lot of money in the online world today. In the simplest of words, this process means exchanging different currencies in order to get a profit in the end. Sounds super simple and exciting, right? Well, if you are a novice trader, you should keep in mind that everything is not as easy in the trading world as they say. Currency trading is connected with a lot of aspects and it is crucial to get proper knowledge and acquire the necessary skills in order to accomplish successful results here. In fact, Forex is the largest market in terms of size and liquidity, and the daily trading volume is more than 6.5 trillion dollars here. So, it is pretty obvious why a vast number of people want to engage in this field!
In this article, we would like to cover one of the most important aspects of forex trading, which is technological innovation, and its importance on the overall market. Due to the fact that technologies have improved drastically over the last few years, we are seeing more and more unique opportunities for traders. Technological aspects can be described in two ways when it comes to Forex trading – the first one includes trading platforms and their characteristics, and the second one consists of algo trading and the working mechanism of trading robots.
The first thing you should learn about Forex trading is that this process is not possible without a proper trading platform. They help you to perform every essential procedure when it comes to trading and most importantly, a user-friendly interface will make sure for newbies to utilize them without any difficulties. So, what are some of the most frequently used trading platforms and how can technological innovations help them improve?
The first trading platform called Metatrader 4 appeared in 2005 by the company Metaquotes Software. This was certainly a revolution in the trading world since it became possible to execute traders only in the comfort of your home, and the software contains both a server and client component. The most appealing attribute of Meta 4 is that you can use this software with an array of devices including laptops, smartphones, and tablets. This was the first-ever trading platform and it has managed to retain popularity to this day by constantly improving its features.
You have to simply download the MT4 exe file and start using this platform as soon as possible!
The upgraded version of this product is called Metatrader 5, which has caused skeptical viewpoints at the beginning of its release. However, people quickly realized the immense potential of this software and actively started utilizing its innovative features to great effect. The company has introduced more and more innovative features to this trading platform over the last few years, so it is no surprise that Meta 5 is the number one choice for the majority of traders!
Another aspect of technological innovation in the Forex market includes trading robots. This process is called algo trading since bots are constructed with a predefined set of instructions, also called algorithms, such as time, price, and value. This means that trading robots have the capability to observe the market and predict its movement within seconds, while this process might take hours or even days for humans. As a result, they are able to accurately deduce when to open and close trading positions during a certain period of time and provide the best advice all the time.
Most importantly, trading robots have made sure to completely rule out human emotions in this process. Humans often act based on anger, greed, fear, and other feelings, which oftentimes end up with fatal results in the Forex market. Given the fact that it is pretty much impossible to control emotions all the time, algo trading has solved this issue perfectly since bots make decisions based on algorithms, not feelings. So, you can completely rely on them and no longer worry about the risks involved in the trading process when it comes to your feelings and emotions.
Due to this very reason, many people think that trading bots will completely replace human labor in the near future. Well, to be frank, this is a big question since they have yet to prove their full ability. Even though the benefits of algo trading are tremendous, there are still some drawbacks to take into mind. For instance, trading robots are generally scalpers operating only within a day or two, so you can’t use them if you wish to trade long-term. What’s more, the lack of human emotions can be a downside as well, according to some people, since intuition is often necessary for trading. Sometimes people make decisions based on pure gut feeling when they are not sure what to do and it often ends up with positive results.
As you can tell, technology has a huge role in the Forex market in terms of both trading platforms and bots. Hence, we should expect more and more innovations in the future!