Forex auto traders can help novice UK traders in several ways, but the primary way is by removing some of the emotion from trading.
Just like any profession or job, you will probably find that most new traders quickly lose money and experience a great deal of “emotional stress” as a result of this loss.
For this reason, auto traders are favoured among many beginner forex traders: they allow the trader to make their entry and exit decisions based on analysis using trading systems already built into the software, rather than having to make these decisions themselves.
For example, one of the most popular auto traders uses price patterns to recognise good buying opportunities when specific criteria have been met.
This asset recognition is often based on previous highs and lows of the price, so if you are using an asset trading chart to track this movement, you only have to acknowledge the trades as they happen.
Because your trade decisions are being made for you, it is much easier to follow these preset criteria without any emotional attachment, e.g. “What if I’m wrong?” or “I should have got out when the market went against me.”
Another example would be using a Bollinger Bands auto trader, which tracks bands within the price movement around a specific asset, for example, if it were gold.
You don’t need to know about technical analysis because all you do is input how much money you want to spend on each trade, how many pips or points you want to risk, and the programme will automatically make your trades for you.
It means that there is no emotional attachment once again, so it is easier to follow along with the system.
You can also use forex auto traders in conjunction with some of the more complicated analysis tools on offer. For example, some traders use moving averages in combination with Bollinger Bands.
This type of trader would set up their chart using these analysis tools, which would then send them to buy/sell orders on specific price criteria, thus meaning they don’t need to place any more orders themselves.
Therefore, they could focus purely on identifying good entry points and making a trade.
In this way, Forex auto traders help novice UK traders by removing the need to constantly monitor charts for good entry points, which can be very time-consuming.
Forex auto traders are also beneficial because they remove the risk of slippage due to entering incorrect orders, known as order flow.
If you are entering your trades yourself, you have to make sure that your trade is not in conflict with any other trades in progress (known as opening interest) and try to avoid using market orders where possible.
However, Forex Auto Traders use ‘continuous’ rather than market orders.
By the time you enter the market, it may well already be in motion against your position, meaning that when you exit, it will likely cost more than if you were doing this manually (and also thus costing you money).
For example, if you were trading GBP/USD manually, let’s say with a medium-term trader, then when you entered the market might have been 1.4163.
When you place your entry order to buy at this level, however, you are not guaranteed that by the time it reaches your broker (which can take several seconds), it will still be in this price range, meaning the order may arrive at a higher price causing slippage.
Hence forex auto traders help novice UK traders because they remove some of the emotional stress involved with trading and prevent them from making costly mistakes.
The most popular types are based around algorithms that follow specific criteria set by the trader to enter trades, thus removing any manual decision-making and the risk of entering orders incorrectly.
Nowadays, several types of forex auto traders are available, and they offer a great way to help novice UK traders enter the market with relative ease.
They can either be used as standalone tools or in conjunction with other popular forms of analysis such as moving averages, Fibonacci retracements etc.
Link to Saxo for more info.