Forex Trading Software – Easy Money Or Wasting Your Time?

When we talk about Forex Trading Software we mostly refer to software that can automate the forex trading process.

When you trade on the stock market, you ideally have to study the financial statements of the companies involved. You have to know how much profit they made during the last year and how much profit they are expected to make during the next year. You should also be aware of little known ‘inside’ information that can have a dramatic effect on the share price of a particular company.

The forex market is different from the stock market in this respect. Information is more readily available. The same information is available to all traders, so at least theoretically they all have an equal chance of success, or failure.

Unfortunately real life is seldom that simple. You have hundreds of currencies out there. Something positively or negatively influencing the value of the Euro today can have an effect on the dollar tomorrow – or on the Yen this afternoon. You need lots of time and you need software that can track all the factors involved before you can make a really informed decision. If you are a full-time professional trader that’s fine, but part-time traders seldom have the time and resources to do all this.

In comes automated trading software – software that will study all the different technical indicators for a particular currency and then come up with a trading signal – telling you whether you should buy or sell that currency.

All of these software packages don’t come equal though. The really good ones will do all the analysis, arrive at a trading signal and then give you a detailed report on how it came to that recommendation. This way you will learn to understand how good trading decisions are arrived at and eventually be able to override the program with an even better trading decision of your own. The less sophisticated – and cheaper – packages will still analyze the data and very likely arrive at the same recommendation, but it won’t give you the detailed background that will enable you to understand that recommendation better.

Sworn supporters of fundamental analysis will no doubt tell you that, although the software packages might technically be working fine, they are flawed in a very basic way. That movements in the value of a currency can not be predicted by studying things like moving averages – they don’t predict the price, they follow it. These traders will argue that currency movements are caused by fundamental factors: the balance of trade, interest rates and inflation.

Traders who firmly believe in technical analysis will in turn argue that all fundamental factors will in the end have to show itself in terms of a movement in some or other technical indicator. Whether it’s the price breaking through the moving average, trading volumes changing suddenly or something else – there will be a change in a technical indicator. And the forex trading software will pick up this signal sent by the technical indicator and come forward with a trading signal. In the end your decision as to whether you prefer to do manual trading or make use of one of these software packages will be determined by time constraints and whether you are a supporter of fundamental analysis or technical analysis.

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