Let’s face it, Markets have changed – the computers have taken over!
The algorithmic programs now do most of the market making and dominating the daily Fx flows, essentially narrowing margins to a fraction of a pip.
This kind of trading approach, is also known as automated forex trading. It makes use of programmed computer code and generally focuses on short-term price action.
It is also classified as “black box trading” given that these programs are mostly hidden from the public and generate profits on sudden spikes in volatility.
There are many variations of these machines many of which are quite expensive for the retail pocket. Usually these algorithms are used in automated market centers and private trading pools, also known as “dark pools.”
There are ones that use arbitrage which look for price imbalances across different markets and brokers, making quick profits on buying and selling large positions.
Others, are known as high-frequency trading (HFT’s), which operate at a very fast speeds, and are able to go in and out of trades in a matter of millisecond, – that is one thousand of a second!
Currency trading still continues to be a “dirty” Game
Banking companies continue on paying their billion dollar fines for rate fixings and market data manipulations. Nevertheless, their greedy party is evidently getting to an end.
Customers becoming much smarter nowadays; everyone has access to price information, and competition for acquiring a clientele is ruthless.
In my opinion, Forex will never be a totally clean market until it will be regulated on exchange, which, by the way, might happen in the near future.
Nonetheless, the daily Fx environment that we’re in right now, looking purely from a retail standpoint, can be considered, more or less, as a level playing field.
Let’s take a look at what we have today for free, as opposed to only a decade ago
Most Brokers’ trading platforms, nowadays, come with free charts, especially MT4’s. And, yes, back in the days you actually had to pay for charting.
Below are some free charting services you can use from anywhere, just using your browser:
Streaming quotes as tight as 1/10th of a pip, (on Majors), with most ECN Brokers.
I’ll repeat myself again, you had to pay for quotes itself back in the days.
Extensive Market Analysis prepared by professional analysts is also available for free on many sites.
To name the few:
Today, high commissions are merely a history. As I mentioned before, ruthless competition among Brokerage houses allows us, the retail traders, to trade with very low spreads and commissions as well.
I don’t know about you, but I still remember paying 4-5 pips spread on EUR/USD trading pair.
Be sure to also read: What You Need To Know About Margin Trading in FX Markets
With the rise in computer processing, many algorithmic machines are being created, as we speak, by the well funded trading Elite. And even though, in times when the algos are trying to dominate the daily Fx flows, the very same technology is essentially enabling the retail trader to compete in the most challenging of arenas – the FX Market.
What Do You Think?
Are algos hurting the Industry…
Should FOREX become a centralized Market…
Please leave a comment and let us know.
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