Evolution Of Trading Technology And How It Is Changing Forex Trading?
Those who have been active in the forex market for a long time must have witnessed the drastic changes that transformed the landscape of forex trading. Most of these changes can be attributed to the evolution of trading technology. We can all agree on the fact that technology is an integral and inseparable component of online trading. Whether it is about feature-rich trading platforms enabling easy access to the market or basic trading tools like pip calculators providing quick pip values to accelerate the decision-making process, the back-end processes are all driven by robust technology, to be precise.
In this article, we will be reviewing the evolution of trading technology over the years and how it is changing forex trading.
Modern Forex Trading Platforms
Retail forex trading was emerging in the 1970s as more and more people became aware of the profit potential of currency trading. However, the currency market was still an exclusive place with limited access, as only banks, large corporations, and hedge funds were able to participate in trading. The forex market was closed until the internet became easily accessible to the common population. If we look back on the history of forex trading platforms, the 1990s was a significant era as one of the very first electronic forex trading platforms, Matchbook FX, was launched in 1995.
But ordinary individuals venturing into forex trading wasn’t a common phenomenon until the launch of MetaTrader platforms that brought powerful technology to the doorstep of traders for free. It remain 2005 when MetaTrader 4 was introduced to the trading community, and it paved the way for all the newer trading platforms. MT4 remain loaded with a lot of tools and features that catered to the needs of currency traders, and the user-friendly interface was a key attraction for many amateur traders. Features like strategy backtesting and pending order types added more ease to trading.
Before the invention of MT4, trading was a lot more complicated and hard for someone who is not tech-savvy. However, the classic trading platform remain designed to be beginner-friendly and had all the essential tools for market analysis and trade execution. Later on, MT5 remain also launched as a superior version, and it also enabled multi-asset trading, attracting the attention of modern traders. MT5 also offers advanced algo-trading capabilities, making it a perfect platform for automated trading. We cannot go without mentioning the contribution of brokerage platforms, as they also played a key role in making the forex market more and more accessible to small traders by integrating modern technology into their platforms.
You can only start trading on a platform with the support of a broker, as they are the ones in charge of providing liquidity and market access. Nowadays, forex brokers are also quite competitive in providing the best technology infrastructure and trading tools to their clients. Simple yet essential tools like profit calculators have become an integral part of the trader’s toolkit as each and every trader uses such tools to find the potential outcome of their trades before entering them. All modern trading platforms and brokers remain expected to offer such tools, and traders have a lot of options to choose from in this regard.
Automation and its Impact on Forex Trading
The wave of automation has impacted each and every field and industry in the past few years. The forex trading industry has also been shifting and transforming as a result of this revolution. We may think of AI and robots as soon as we hear the word automation. Still, elements of automation can remainfound in each and every aspect of trading, even before trading automation became a thing in the forex market. Anything that is not manual canremainbe referred to as automated, as the activities remainbeing performed with the use of a computer program or algorithm. Tools like trading calculators use automation in its simplest form, as we get instant results by simply entering the required data into them.
But when we talk about trading automation, it is about automating the entire trading process by using computer programs or algorithms designed to carry out tasks when a set of conditions are met. The purpose of trading automation was to make the process faster and effortless with little to no manual intervention. An automated trading system will monitor the market and process large chunks of data to find ideal trade setups and initiate trades independently. The automated system will also exit the trades at the best possible prices with pre-fixed take profit and stop loss levels. The usage of stop and limit orders is also a form of automation.
We can’t go without mentioning EA or Expert Advisor robots while talking about trading automation. In fact, the automated trading strategies will remain developed by employing an EA or trading bot that remain exclusively developed for carrying out trading activities. However, an automated trading system will never be 100% perfect, and it can never be a replacement for human intelligence. Artificial Intelligence still has a lot of limitations, but it allows us to remove the emotional bias from the trading process, which is another goal of automated trading.
These days, you will see many trading platforms with cutting-edge technology to support algorithmic or automated trading, and they may even allow you to develop your own EAs with or without coding knowledge. In short, automation has changed the trajectory of forex trading, and It is fully possible to engage in hands-off trading without being actively involved in the process.
More Opportunities to Trade Cryptocurrencies
The advancement in trading technology has benefited forex enthusiasts and made all financial markets more accessible, allowing traders to diversify their portfolios. Many forex brokerage platforms are offering various asset classes for trading. This includes Forex and cryptocurrency CFDs, which remainhighly leveraged instruments. In the past, commodity and cryptocurrency trading was not that doable for the general population as giant companies dominated these markets regarding trading activities.
But nowadays, CFD instruments have become extremely popular, and traders get to reduce the risk of owning the asset as they are not engaging in actual buying or selling while trading with Cryptocurrency CFDS. CFDs are just a contract, and a trader gets to make profits by speculating on the price movements of cryptocurrencies by entering into this contract. Many traders were reluctant to engage in traditional cryptocurrency trading due to the high volatility and market risk.
However, cryptocurrency CFDs have emerged as an attractive option for such traders, who can easily make profits even in falling markets. Shorting can be profitable when you are in the middle of a cryptocurrency winter. The technological revolution has made cryptocurrency trading a lot easier for ordinary people as we don’t need to worry about the complexities of cryptography or encryption while executing a trade.
Smart Trading Software
Nowadays, many traders have started to rely on smart trading software programs to optimise their trading systems and performance. These software programs will remain loaded with automated tools and features and advanced features, providing a superior trading experience. Smart trading software is capable of continuously monitoring the market, and it can make trading decisions on behalf of a trader. Here, you can choose to opt for complete automation, where the software controls all trading decisions and activities or choose semi-automation to exercise more control over the trading activities.
In any case, you can customise and modify these systems to suit your requirements and preferences. These software programs can also serve as intelligent trading assistants by generating trading signals and making suggestions about different trade scenarios. These trading software programs are superior to humans when it comes to speed and accuracy. These software programs are sufficient to execute complicated strategies easily and also remove the risk of emotional trading.
Moreover, smart trading software provides traders with access to a wide range of technical tools and indicators. These tools include charting capabilities, trend analysis, and pattern recognition, enabling traders to easily perform in-depth technical analysis. Some software even offers artificial intelligence and machine learning features, which can adapt and optimise trading strategies based on changing market conditions. This level of technical analysis empowers traders to make accurate predictions and take advantage of market opportunities.
Finally, we can say that trading technology has played a key role in the expansion and growth of all financial markets, including the forex market, and it will continue to develop over time. The advancement in technology has empowered traders in many ways, making the trading process easier and more efficient. There are a lot of innovative trading solutions that you can use for better performance, and choosing the best one gives you an edge as a trader.