Business First Family Business, Accounting, Finance, Investing, Marketing And Management
Algorithmic forex strategies are automated trading systems intended to increase the efficiency of a trader’s market analysis. These algorithms have been developed using the most popular programming languages such as C++, Java and Visual Basic on purpose-built machines or virtual machines running on commodity hardware.
Algorithmic trading is gaining popularity in Australia due to its ability to process large volumes of data in short time frames while adhering to strict risk management rules. Despite the complexity of these strategies, it is possible for anybody with little experience in programming and basic knowledge of financial markets, such as forex arbitrage, to identify patterns that would indicate a profitable trade.
Statistical Arbitrage
Statistical arbitrage is the practice of taking advantage of price inefficiencies between similar financial instruments. For example, if a trader sees that AAPL is trading above MSFT, but the spread is relatively high, they may conclude that there are no opposing orders to bring these two assets into equilibrium. These traders will buy AAPL shares while short-selling MSFT on the same exchange to close the trade at an equal value. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that simultaneously maximize purchases of undervalued assets and minimize sales of overvalued ones.
Volume-Weighted Average Price (VWAP) Strategy
VWAP is a strategy that tracks the average price of an asset over a certain period and uses this as a benchmark to measure the traders’ performance. The trades are executed when they deviate from the targeted percentage of the price range, thus allowing for greater returns over fewer transactions. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that simultaneously monitor trade volume and execute trades based on predefined market rules.
Transaction Cost Analysis (TCA)
TCA is used to compare transaction costs such as brokerage fees with the actual capital collected through trading transactions to assess its effectiveness. You can then incorporate these assessments into future algorithmic forex strategies that minimize transaction costs even at the expense of lesser returns. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that determine whether it is possible to collect more capital via cheap transactions or allow the best forex brokers to take a higher commission.
Time And Sales Filter
Time and Sales is a data feed that provides traders with information on each transaction, including time of entry, bid price or offer and size traded. The trader may incorporate this information into their algorithmic forex strategies for CFD trading by creating an algorithm to automatically detect and execute trades when they deviate from historical averages. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that identify patterns in trade times and sizes that indicate potential overreaction due to market pressures.
Parabolic SAR
Parabolic SAR uses moving averages of assets to determine when it is best to buy or sell. For example, suppose an asset’s price rises by a certain percentage over several trading periods. In that case, the trader may choose to place a sell stop order triggered when the curved line crosses above zero. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that monitor changes in asset prices and automatically detect their relationship with past trends.
Channel Breakout Strategy
This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that monitor changes in asset prices and automatically detect their relationship with past trends. You can apply this strategy to algorithmic forex strategies for CFD trading by creating algorithms that monitor trade volume and execute trades based on predefined market rules.
Bollinger Band Trading Strategy
Many investors also use Bollinger Bands to gauge trends. You can use Bollinger Bands to measure the volatility of an asset by calculating its 20-day moving average, added to and subtracted from its price range. The trader may incorporate this information into their algorithmic forex strategies for CFD trading by creating an algorithm that automatically buys or sells when prices deviate away from historical averages. This strategy can be applied using algorithmic forex strategies for CFD trading by creating algorithms that simultaneously monitor trade volume and execute trades based on predefined market rules.
