Photo Credit: Noam Revkin Fenton/Flash90

It’s been five years since Doug Goldstein released his first principles guide to currency trading, along with the risks and rewards that go with it. In the modern era, that’s a long time, and the Forex world has moved on apace, both in Israel and globally.

It seems strange to talk about five years being a long time in that context, given that most historians suggest the first ever Forex traders were Jewish and operated around 2,000 years ago. Here, we take a look at that earliest history, and then bring the story right up to date, assessing the rocky path leading to the most recent technological advances, which have brought Forex trading within reach of anyone.

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The earliest traders

In biblical times, there are references to money changers operating from the temples and from market stalls. The very phrase “money changer” sounds like something a little shady, but in fact, these people carried out what was seen as an important job at the time. Only certain coins were suitable for donating to the Temple – ordinary currency was deemed unclean. Fortunately, the money lenders had a good stock of special, clean temple coins, which they would be willing to exchange for travelers and visitors. Subject, of course, to a small commission fee!

A chequered history

That air of suspicion is one that has hung over the Forex scene and never entirely cleared. 2000 years on, there were money changers of a different kind causing an international stir. The Times of Israel published one story after another about binary options scams in Tel Aviv. Ultimately, Israel followed the lead of other governments around the world, and completely banned the controversial practice.

A new dawn for Forex

The technological age has proved to be one in which genuine, principled Forex trading is at last within reach of anyone. Brokers are rigorously regulated and the authorities are not shy about banning those that fall short. But even more significant is the innovative software that has effectively negated or at least vastly reduced the need for middle men at all. The technology improves with every passing day, so let’s take a look at some of the best automated forex trading software 2018 has brought us so far, and the benefits it can bring to traders.

How do automated trading systems work?

Some commentators describe it as “hands free trading.” Automated and social trading platforms like eToro and Trade360 have taken the world by storm and attracted millions of amateur traders. They take the effort, the time commitment and, not least, the emotion out of trading. Switch it on, enter your basic parameters and the program will do all your trading for you while you get on with your day. But are these systems all they are cracked up to be? And how do they compare with conventional brokers?

There is nothing magical about the programs themselves. They simply use market information and the vast array of signals and indicators to extrapolate trends and come up with currency pairs that could prove to be a lucrative trade.

There are some things that machines can do better than humans, and making complex calculations on the basis of multiple variables is one of them. An automated system can therefore perform a far more in-depth analysis of more currency pairs with better accuracy than an individual could ever hope to achieve. So does that mean we should all be using automated systems? Not necessarily.

What are the downsides?

Look at all the moving averages, standard deviations and other statistical indicators you like, the problem you still have is that you are using past events to predict future behavior. This sort of trend analysis certainly has its place for traders – after all, if it didn’t we would not have all these tools and indicators in the first place. However, there are other factors that are just as important.

The behaviors of currencies in relation to one another can be prompted by a million factors in a kind of butterfly effect, and sometimes it is as much a matter of intuition as empirical data that informs a trading decision. While machine learning and artificial intelligence have made huge leaps of progress, intuition is one area in which they cannot compete with their human counterparts – at least, not yet.

Points to consider

An automated trading platforms is, without doubt, a useful tools to have in your armory. The important thing is to use it sparingly, to identify the simple trades that fall within given parameters, while you dedicate your time, knowledge and most importantly, intuitive skills to deeper research into the factors that drive the markets. Get that balance right, and it will be a genuine case of man and machine operating in perfect harmony.

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