The last lesson discussed what to look for in forex trading software. This lesson goes into a bit more detail on types of software, and then gives some examples of available packages.
There are two basic types of software trading programs. The first type allows you to download market price data to perform technical analysis. You evaluate the charts and make your own buying and selling decisions. This is the most commonly used type of trading software.
Automated Forex Trading Software
The second type of software is automated trading software that makes trading decisions for you. All you do is execute the trades that the software tells you to execute. Some packages even automatically execute the trades.
Within this category of automated trading software there are two sub categories:
- Toolbox or White Box programs explain to you the reasons behind the trades and many will let you adjust the decision-making parameters the software uses to make those trading decisions. When those features are available you can custom-design your own trading system.
- Black Box programs make trading decisions without exposing the reason or logic behind those decisions. This puts you at the mercy of the software developer and the trading expert who created the trading rules. While many people have reported overall good results with black box programs, you have to be willing to make a leap of faith every time a trade signal is generated.
TradeRobot, a software company based in Anguilla, British West Indies, offers a selection of both black and white box programs. Depending upon the product chosen, you can either program in your own trading rules and then let the software take over from there, or use their pre-programmed version that makes all of the trading decisions automatically using its own internal logic.
The advantage of these so-called â€œrobotâ€ trading systems is that they remove all fear and greed from trading. These advantages do not come cheaply, however. TradeRobot packages start at $500 and top put at $997. These are registration fees only. There are also monthly subscription charges as well as round-trip commissions per trade.
Fabrefactum, a Philadelphia, USA-based company offers a product called PowerBot, a white box trade execution program that offers you the ability to program in your own trading logic. PowerBot sells for $699 with no ongoing or commission fees.
When it comes to conventional forex day trading software, TradeStation is the hands-down leader. It includes a robust backtesting system that enables you create trading scenarios and systems against up to 20 years of real intra-day market data. It then shows you how your trades would have gone so you can fine-tune your strategy.
Once you have established your strategy, TradeStation’s sophisticated trading algorithms automatically identify trading opportunities that match your trading strategy by monitoring the market in real-time, tick-by-tick. Then it automatically generates both your entry and exit orders. As powerful and automated as TradeStation is, it is willing to step aside and let you use its manual trading features without losing access to its rich suite of charting and technical analysis tools.
While there are low commission charges if you are trading equities, futures or options, forex trades are free. The system is web-based and comes with a free 30-day trial. They have a continuing free membership level for light traders, and standard subscriptions are $99 per month.
Although TradeStation is the industry leader, some traders prefer to use WealthLab or Metastock.
WealthLab comes with the standard trading software features that you would expect, but it has an additional backtesting feature that others lack. Two features, actually. First, WealthLab users are able to access a database of over 1,000 trading systems to see which ones performed the best. They can import a system directly into their WealthLab profile and the software will execute trades using that system.
The other feature that WealthLab is particularly proud of, and which it claims sets it apart from all competitors, is the fact that when you do scan those systems, or when you create your own backtesting scenarios, you can test against actual portfolios. This means that your trading system can be built and tested against actual currencies in your portfolio.
WealthLab runs on your PC. It’s available ONLY to customers outside of the U.S. and Canada only from the WealthLab web site where it sells for $650. U.S. and Canadian residents can get a copy of WealthLab through Fidelity Investments.
Metastock is also PC-based. Its leading feature is that it is specially suited for performing technical analysis. It comes pre-loaded with 120 built-in technical indicators that make it easy to analyze how the market is moving. You can easily drag and drop any of these indicators into a chart and create your own trading system that’s 100% customized to your needs. The current version sells for $449 plus subscription fees for any data feeds that you want.
Before you choose any software trading platforms, do your due diligence. Take advantage of any free trial offers, ask your friends and associates what theyâ€™re using, read independent reviews (not sales documents) and visit each product’s web site.