3rd April 2020

Do Forex Trading Strategies Have An Advantage?

Do Forex trading strategies have an advantage? Yes, they do!

A strategy is not effective when trading does not deliver the expected results from the backtest.

Reasons for failure may include:

  1. The strategy did not take into account the impact on the market;
  2. The strategy is a copy from other traders, and is not suited to the trader’s trading style.
  3. These are just two examples of why a strategy can fail in the result, in truth there is no single answer to the correct functioning of a strategy, in fact it can depend on many factors.

Types of Strategies

There are two types of strategy:

  1. Competitive: these are high-speed trades, meaning that trading times favor the number of trades;
  2. CompetitiveStatic: the strategy is designed to achieve a constant and positive statistical advantage.

Both strategies are time sensitive, and work in a context of fierce competition, and if applied correctly, they bring very important investment returns.

The Profitability Of A Classic Strategy Can Change

Profitability is a combination of several factors. When a strategy that we call classic no longer delivers the expected results, the factors that have negatively influenced it can be of two types:

Several players intervened in the market at the same time, eroding the original profitability. So more competition erodes the initial benefits.

Conversely, when the competitive advantage decreases, a lower statistical margin corresponds to a lower profitability.

Emotions influence the advantages of calm negotiations.

The Efficiency Of Manual Strategy Compared To Automatic Trading

Automatic Forex trading loses its advantage over manual trading if the trader has executed:

  • A correct initial Backtest;
  • If the global economic conditions are favorable.

In the case of correctly tested and researched strategies, in a context of normal market conditions, a manual strategy can produce excellent results, better than those resulting from automated trading.

First, however, you need to correctly understand the basics of manual Forex trading system and test it on a demo account.

Is Automated Forex Trading Better Than Manual Trading?

There is no unique answer to this question, because there are several variables. Being able to determine with certainty the statistical efficiency of an automated or as accurate software as possible is every trader’s dream.

Many companies hire qualified personnel and invest millions just to find the answer to this question.

The Efficiency of a Strategy

The efficiency of a strategy depends to a large extent on the methods of creation, whether historical data have been used or a different set of related historical data has been used. The question is:

“Is the historical record large enough to be statistically valid?

The Best Strategies

Strategies are those created by means and methods that allow for objective verification, i.e. whether a range of relevant historical data was taken into account during creation. Be careful, however:

A strategy can be the victim of market adaptation by making it no longer effective.

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