Forex Trading Strategy Algorithm
Forex Trading Algorithms commonly called trading algorithms and black box trading, is a trading system that uses a rather complicated and sophisticated mathematical model and becomes a decision-making formula with the execution of fast transactions in the forex / financial market. The features of rapid execution involve the use of computer programs and algorithm steps to create and define trading strategies for optimum gain.
In investing, hedging becomes a way to protect your assets from significant losses by reducing the risk of loss from something unexpected. In trading algorithms, hedging can be done automatically to reduce risk exposure on the trader. Such hedging orders automatically follow certain models to manage and monitor portfolio risk levels.
In the forex market, the main trading method uses hedging through spot contracts and forex options. Spot contract is the purchase or sale of foreign currency with immediate delivery. Movements that are reflected in market prices, allow for arbitrage opportunities to arise.
Triangular arbitrage opportunity is the process of converting the currency back into its own value through the conversion process to several different currencies. Well this is needed an automatic algorithm program because it is done quickly and high frequency in order to identify the opportunity.
As a derivative, forex options operate in the same way as options on other types of financial portfolios. Buyers The forex option has the right to buy or sell the pair at certain exchange rates at certain levels in the future. Computer programs have automatic binary options as an alternative way to protect the value of foreign currency trading.
In the financial industry, statistical analysis remains an important tool in measuring price movements for security over time. In the forex market, technical indicators are used to identify patterns that can help predict future price movements. The principle of “history repeats itself” is the basis of technical analysis.
Complete information on the forex price drivers can improve the accuracy of estimates (forecast) statistically. The more sophisticated the current computer program, trading algorithms have been generated through technical indicators, including moving average convergence divergence (MACD) and Relative Strenght Index (RSI). The algorithm program suggests a certain time in which the currency should be traded.