One of the best things about forex trading is how versatile it is: there is a trading style and strategy to suit anyone and everyone. At Vantage FX, we firmly believe that If you remain disciplined, adhering to your trading plan and proven strategy, nothing can stand between you and success. In this piece we will discuss the various approaches to forex trading and the pros and cons of each. We will cover traditional manual forex trading, automated trading using bots or EAs, and the automated/semi-automated approach made possible through forex signals.
Manual forex trading: technical and fundamental analysis
Manual forex trading is the art of using fundamental analysis, technical analysis; or even a combination of the two, to identify high probability trades and beat the market. Manual forex trading is the most difficult option, but if you are good at it, it can also be the most rewarding. Manual traders must be extremely disciplined and adhere to a strict risk management and trading plan in order to ensure their success. With manual trading, the buck really stops with you – whether or not you are successful comes down entirely to how much effort you put in, your knack for analyzing markets and your ability to stick to your trading and risk management plan.
Technical traders use trend-lines, fibonacci tools, chart patterns, candlestick patterns and technical indicators to determine the trend and potential entries and exits. Technical trading works over all time frames, from the 1 minute chart all the way up to the monthly. Having said that, most analysts agree that technicals signals become more reliable on higher time-frames.
Fundamental trading is different as it squarely geared towards longer term trading. Fundamental traders look at interest rate decisions and differentials,GDP figures, jobs numbers and other data to identify underlying strength in a particular economy and currency. Even though fundamental trading is best suited to longer term trading, lots of successful traders at Vantage FX, combine both technical and fundamentals to gain an edge over the markets. For example, you could be bullish the Australian dollar due to steadily improving economic data down-under, but time your entry based on a lower time-frame technical signal.
Automated forex trading: bots and expert advisors
Automated trading using forex bots or expert advisors (EA), removes 99% of the human element from trading. This is why it is so attractive to a lot of people – as an automated trader, you no longer have to worry about risk management, finding trades, exiting trades and all the rest. Your forex robot takes care of everything for you. Having said all that, as with anything in life, there is no easy way to greatness.
One of the hardest things about automated trading is designing or finding a robust profitable automated system. Designing a system to withstand all possible markets conditions and possibilities is a very intensive task and could take years. This is also what makes finding a profitable system for sale quite difficult, as system developers put so much time and effort into their trading bots, the good ones don’t come cheap. There are also a lot of scammers out there on the retail market, promising quick riches and holy grail trading strategies.
On the bright side, with so many forex forums, trading websites and the recent demo test functionality implemented on the mql5 store, it is much easier to sort the bad apples from the good. Always looks for reviews about forex robots before buying, and always test and backtest your robots on demo accounts before taking them live.
When running forex bots and expert advisors, you should always trade with a true-ECN forex broker like Vantage FX.
Automated and semi-automated trading: forex signals
One of the most popular ways to trade forex in this day and age, is via the use of a forex signal service. Some forex signals might come from a robot, but often these signals come from top notch manual traders or even a team of them. Sometimes these signals can be linked directly to your Vantage FX MT4 account and all trading will happen automatically. Other signal services just send you notifications prior to a possible trade occurring, allowing you to analyze the trade for yourself and decide whether or not it is right for you.
The automated approach is great if you are time-poor, but still want profitable exposure to the foreign exchange markets. The semi-automated approach is great if you have a little more time on your hands and want to learn more about trading while you profit. Both types of signals have their advantages and disadvantages, so like with everything else in forex trading, you to need to find a service that suits you and your forex goals.
Just like with forex robots and expert advisors, it is important you do your due diligence and select a reliable and robust signal service. You’ll want to look at a proven track record on a real account and make sure to do a quick search for user reviews to see how those who have came before you fared. Forex signals are steadily becoming the most popular way of trading forex and other securities.
What works for you?
At the end of the day, it’s all about finding what works for you and your financial goals. As you get older you may want to adopt a more conservative automated strategy, but when you are young you may be wanting to stay up late and trade an aggressive manual system. There is honestly a trading style and strategy to suit each and every person, throughout the various stages of their lives. Don’t just give up because you are having tough time beating the markets with manual trading, there are so many other options out there. Vantage FX supports all types of trading and trading styles, and we have successful clients who utilise each and every approach. Come over to the website and try out one of our RAW-ECN accounts, we have some of the lowest spreads around and one of the best commission charges in the industry!