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A Beginner’s Guide to Automated Trading

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Read Time: 8 Minutes

If you are a regular trader and you’ve realized that trading is taking up way too much of your time, you might want to look into automated trading.


For the uninitiated, automated trading involves inputting a set of commands that will automatically execute when certain conditions are met.


You can set your buying price and selling price in advance. When the stock or currency price meets the price you’ve set beforehand, trading software (like MetaTrader) will automatically execute your trade. For the more seasoned traders, you can also base the buying and selling points on conditions like moving averages or convergences. You can even go more complex with algorithmic trading, using complicated algorithms you write yourself to execute trades. This is where trading robots come in, and they can be pretty good at what they do.


The best thing about automated trading is that you don’t have to spend hours upon hours monitoring graphs and charts, waiting for the best time to trade. This is wonderful for forex trading, where the markets are open 24/5.


Additionally, automated trading gives you (or at least, your trading robot) the power to scan millions of different charts at a speed that no human ever could.


There are even features like Fusion+ copy trading, where you can set the program to automatically copy a trader’s actions. If there’s a forex trader you really trust, for example, then you can save yourself the hassle and just set the software to copy all their trades.


Of course, automated trading takes a little learning to get into, which is why we are providing this beginner’s guide to automated trading.

 

1)     Buy off the shelf to start


There are a number of platforms that offer automated trading software. There’s no need to build a trading robot from scratch, especially if you’re just starting out.


Trading platforms like MetaTrader4 — the most popular forex trading platform — have tools that allow you to get into automated forex trading. You can check out the “Market” tab in your trade terminal section within the platform and have a browse of a wide range of EAs/robots to purchase to get started.


Their platform lets you use trading robots built by others (there are paid and free versions) and if you want to start off with a small amount of capital just to see how it feels, this is the place to do it.


2)     Know the difference between a good robot and a bad robot


As with any software you plan to download and use, you should know if the robot you’re planning to use is a good one. After all, real money is involved here.


In forex trading, where markets run 24/7, you don’t want to waste your money on a trading robot that gives you losses.


First, you can consider the track record of the trading robot. This can be as easy as looking at the robot’s reviews on the website itself or looking it up on forex trading forums where you’re bound to find forex traders who regularly use robots.


Second, just look at the website itself. If it looks unprofessional or promises unrealistic returns, you’ll want to stay away. One of the primary rules in forex trading is that if a deal is too good to be true, it probably is.


Third, look at the price itself. Trading robots are complicated software that took a lot of work to make. You’ll be hard-pressed to find good robots that are cheap or even free. If you see a trading robot that’s a little too cheap for you, keep looking.


Finally, you can find plenty of third-party websites such as Myfxbook.com, Forex Peace Army, or the MetaTrader Market that let you find the most popular robots, reviews from real traders that have used the EAs. We recommend doing a lot of research on the sites above before you dive straight in.

 

3)     If building your own, know what’s involved.


As we said, trading robots are complicated software that run on immense lines of code. If you want to build your own, you’ll need the necessary coding and programming skills.


It can take months to build a successful trading robot, and it will take a lot of trial and error, along with plenty of frustration.


If you have an idea for what you want but want someone else to build your automated trading robot without getting into too many complications, you can look at possible vendors like TradingCoders or Robotmaker that can build them for you.


Automatic trading robot builders give you a clean interface where you can build and edit your trading robot without learning complicated programming from scratch.


Regardless of how you choose to build your robot, you’ll still need a lot of market and technical analysis skills to succeed, especially if you are entrusting others to build something for you. Study well beforehand and know exactly what you’re getting into.

 

4)     You’re going to need a virtual private server.


Again, the markets in forex trading are open 24/5. Good trading opportunities come and go in the blink of an eye. The last thing you want to happen is missing a good trade because you suddenly had connectivity issues.


By using a virtual private server like the vendors from Fusion Markets Sponsored VPS (Virtual Private Server), your trading terminal can be connected 24/7 on a virtual machine. You’re basically using a constantly connected server to give you more reliable connectivity so that you are always online and not missing out on trades.


A good VPS will give you not only consistent connectivity but also low latency and fast executions. In forex trading and algorithmic trading, every millisecond counts, so you might as well use the best available tools out there.


Automated trading can be a lot of work at first. Still, it can also be very rewarding once you’ve established your own system. Hopefully, we’ve given you enough information to get you started on your very own automated forex trading journey.



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Beginners
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The Fibonacci Cheat Sheet

Read Time: 6-7 minutes

 

Essential Ratios Every Beginner Trader Should Know. The Fibonacci sequence and the golden ratio have long fascinated mathematicians, scientists, and artists. Their influence extends across every aspect in life and can be observed in nature, architecture, and even the financial markets. Fibonacci-based tools are readily available and can assist in identifying entry and exit points, retracement lengths and more.

   

What is Fibonacci and Why Does It Matter in Trading?

   

The Fibonacci sequence consists of a series of numbers where each value is the sum of the two preceding numbers, starting from 0 and 1. For example, 1+1=2, 1+2=3, 2+3=5, and so on. When we continue this pattern we get:

   

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233...

   

Taking it one step further, if we observe the mathematical correlations between these numbers, we identify a range of ‘ratios’. For example, if we divide 21 by 34, we get 0.618%. If we divide 21 by the number two spots to the right (55), we get 38.2 and so on.

   

This mathematical constant appears in various natural and human-made structures, from spiral galaxies to architectural designs, and even nature.

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In trading, Fibonacci ratios can help analyse price action, pinpointing areas where market trends may pause, reverse, or accelerate. By learning to apply these ratios, you can identify potential support and resistance levels, retracement zones, and projected price targets, ultimately giving you better entries and exits on your trades.

   

Breaking Down the Key Fibonacci Ratios

   

The most widely used Fibonacci ratios in forex trading originate from the relationships between sequence numbers. As an example, some of the most commonly used in trading include:

   
         
  • 23.6% – A minor retracement level often observed in strong trends.
    •      
  • 38.2% – A commonly used retracement level where price corrections may occur.
    •      
  • 50% – Not an official Fibonacci ratio, but significant due to psychological factors.
    •      
  • 61.8% – The golden ratio, a crucial level for support and resistance.
    •      
  • 78.6% – A deeper retracement level where strong reversals may occur.
    •      
  • 161.8% – A common extension level used to forecast potential price targets.
    •    
   

These ratios are applied using Fibonacci retracements and extensions.

   

How to Use Fibonacci Retracements

 
 
   

We have explained Fibonacci retracements as one of the indicators that we have discussed here on our blog before. A trend is a significant price movement in one direction, followed by a price movement in the opposite direction, followed by a price movement in the direction of the initial trend. You can use Fibonacci retracement levels to determine where these pullbacks might find support or resistance. You can get better entries and/or exits on your trades by doing this.

 

Fibonacci Retracements

 

For example, during a bullish trend, price may retrace to the 38.2%, 50%, or 61.8% level before continuing higher. This can also be observed in a downtrend, where these levels can serve as potential swing points where price might pause or reverse before resuming its downward trend.

 

How to Use Fibonacci Extensions

 

While retracements focus on pullbacks, Fibonacci extensions project potential price targets beyond the original price movement, using the same ratios. These levels help estimate how far price may travel after a retracement completes – ultimately leading to better profit targets/exit points.

 

The 161.8% extension, often called the "golden mean," is one of the most significant levels. It frequently acts as a target in strong trends, marking potential areas where price may consolidate or reverse.

 

Extensions are particularly useful for setting profit targets, as they provide logical exit points based on prior price action.


A graph with a line and a dotted line AI-generated content may be incorrect.

 

Fibonacci Clusters: Combining Multiple Levels for Strong Trade Setups

 

A Fibonacci cluster forms when multiple Fibonacci levels from different price swings converge at a similar price point. These clusters can help identify the stronger swing points, which often lead to market reactions.

 

Traders often use these clusters for:

 
       
  • Identifying precise entry points
    •    
  • Setting stop-loss levels
    •    
  • Establishing profit targets


    •  




 
   

Figure 1 – AUDUSD Weekly Chart

   
   

For instance, if a 61.8% retracement from a major trend aligns with a 161.8% extension from a smaller move, the resulting zone becomes a high-probability trade area.

 

Step-by-Step Guide to Using Fibonacci in Your Trading

 

To effectively use Fibonacci techniques in forex trading, follow these steps:

 
       
  1. Identify Key Price Swings – Look for significant highs and lows as reference points for Fibonacci retracement or extension tools. It’s important that you’re drawing the tool using the correct swing high and lows of each move.
    2.    
  2. Plot Fibonacci Levels – Use charting software, such as MetaTrader or TradingView, to overlay Fibonacci levels on key price movements.
    3.    
  3. Look for Areas of Confluence – Check if the Fibonacci levels align with other technical indicators, such as moving averages, trendlines, support/resistance zones, or even other Fibonacci levels.
    4.    
  4. Observe Price Reactions – Monitor how the market responds to each Fibonacci level, looking for confirmation through price action signals like candlestick patterns.
    5.    
  5. Manage Risk Effectively – Define risk-reward parameters using Fibonacci-based stop-loss and take-profit levels.
    6.  
 

Final Thoughts

 

The Fibonacci sequence and golden ratio help to structure the way the market behaviour is analysed, and the major price levels are identified. You can enhance your technical analysis and, by result, decision-making, by applying Fibonacci retracements, extensions, and clusters.

 

However, it is crucial to mention that no tool is 100% accurate and that the use of Fibonacci tools can greatly enhance a sound trading strategy by providing more potential entry and exit points. However, like any other indicator, there are no guarantees, so it is recommended to look for a reaction and/or confirmation of each Fibonacci level before making the trade.


18/03/2025
Beginners
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Leveraging Economic Indicators

Read Time: 6 minutes


For successful forex trading, economic indicators are essential tools in understanding market trends and predicting potential currency movements. These indicators, such as GDP, employment data, inflation rates, and more, provide a window into the economic health of a country, which ultimately influences currency values across the market.  

Understanding the influence of economic indicators allows you to make informed decisions based on more accurate analysis, increasing the likelihood of profitable trades.  



Table of Contents






Key Economic Indicators



Gross Domestic Product (GDP)


GDP is the total market value of all goods and services produced within a country, reflecting its economic health.

A rising GDP often signifies a strong, growing economy, which can boost a nation’s currency due to investor confidence. Conversely, a declining GDP might signal economic trouble, potentially weakening the currency. For forex trading, GDP data can help identify long-term currency trends, particularly when compared across different nations.



Employment Data


Employment data is a major economic indicator with a substantial impact on currency values, particularly the Non-Farm Payrolls (NFP) data in the United States.

The NFP measures employment changes outside the farming sector, providing a snapshot of the U.S. job market. When job creation is strong, it suggests economic health, often strengthening the currency as investors and traders feel confident.

Weak employment figures can suggest economic issues, potentially leading to currency depreciation. Since employment is closely tied to consumer spending and economic stability, this data can be very valuable for traders.



Inflation Rates


Inflation, primarily measured by the Consumer Price Index (CPI), reflects the rate at which prices for goods and services increase.

Moderate inflation is generally healthy, indicating a growing economy. However, high inflation can devalue a currency as purchasing power declines. Central banks often adjust interest rates in response to inflation; if inflation is high, they may raise rates to control it, which can attract foreign investors seeking higher returns, thus strengthening the currency. Understanding inflation’s impact on interest rates and currency valuation is vital for forex traders.



Interest Rates


Interest rates are the cost of borrowing or the return on savings, set by central banks to regulate economic activity and influence currency value.

Interest rates are among the most influential economic indicators in forex. Central banks set these rates based on economic conditions, adjusting them to either stimulate or cool down the economy. Higher interest rates often attract foreign investment, increasing demand for the currency and boosting its value. Conversely, lower interest rates can make a currency less appealing to investors, leading to depreciation. For forex trading, interest rate changes and the policies of central banks (such as the Federal Reserve in the U.S. or the Reserve Bank of Australia) provide critical insights into likely currency movements.



Consumer Confidence Index (CCI)


The Consumer Confidence Index measures consumer sentiment and expectations regarding the economy.

High consumer confidence can indicate increased spending, which drives economic growth, while low confidence suggests economic uncertainty. CCI is considered a leading indicator, as consumer sentiment often precedes actual economic changes. When consumers feel positive about the economy, the currency may strengthen; when confidence drops, the currency may weaken. Forex traders use the CCI to anticipate changes in spending behaviour and overall economic direction.




Interpreting Economic Indicators



In forex trading, interpreting economic indicators requires understanding both individual data points and the relationships between them. Economic indicators can influence currency values in varying degrees, with some holding more weight than others. Traders must also consider correlations, as indicators like GDP and employment data often move together, giving a clearer picture of economic health.

One challenge traders face is managing contradictory signals. For example, strong employment data may suggest a strong currency, but if inflation is simultaneously high, it could lead to fiscal and monetary policy changes, ultimately impacting the currency differently. Weighing the significance of each indicator helps traders decide when to take action and which indicators align with their trading objectives.



Essential Economic Indicators and Practical Application


- For traders just starting with fundamental analysis, some economic indicators offer a straightforward approach to understanding market dynamics:

- Non-Farm Payrolls (NFP): Released monthly by the U.S. Bureau of Labor Statistics, NFP provides a quick look at employment trends, making it a critical indicator for traders.

- Consumer Price Index (CPI): CPI reflects inflation and purchasing power, directly influencing central bank policy and forex rates.

- Central Bank Interest Rate Decisions: Rate changes have immediate and often lasting impacts on currency valuation, making them a fundamental factor in forex trading.

You can find the details of every economic data event using our Economic Calendar.

Accessing timely and reliable economic data is crucial. Many traders use economic calendars, such as our one here, which provide release dates for upcoming economic data, allowing them to plan trades around these announcements. Economic calendars are invaluable tools for tracking data releases, setting alerts, and managing expectations for market volatility.

It's also important to be mindful of common misinterpretations, such as assuming that a single indicator will drive long-term trends. Forex markets are influenced by a multitude of factors, so it’s essential to view each indicator within a broader economic context.




Synergising Economic Indicators with Technical Analysis



Whilst economic indicators provide insights into a currency’s underlying strength, technical analysis offers real-time insights into price patterns and potential entry points. Combining fundamental and technical analysis enables traders to balance economic data with chart patterns, enhancing trade timing and precision. For instance, fundamental economic indicators can provide you with a long-term bias, and technical analysis can be used to find entries and exits in the direction of that bias.




Advanced Trading Techniques



Timing Your Trades


Timing is crucial when trading around economic data releases. Pre-release analysis allows traders to set expectations based on market consensus, whilst post-release strategies can help manage volatility once the data is out. Our Economic Calendar is an indispensable resource in this regard, assisting you in aligning trades with significant data releases and prepare for potential shifts.


Integrating Indicators into Your Trading Strategy


Developing a comprehensive trading strategy involves diversifying currency pairs based on each currency’s economic indicators. For instance, trading a U.S.-based currency pair based on NFP data, while trading an Australian pair based on the RBA’s interest rate decisions, can provide a balanced approach. Incorporating adaptive risk management around key data release dates can help traders mitigate the risks associated with high-impact news events.




Conclusion


Economic indicators are invaluable resources for forex traders, offering insights that can guide trading strategies and improve profitability. By understanding these economic indicators, you can better anticipate currency movements and make informed decisions. However, mastering these indicators requires continuous learning and constant observation.

Ultimately, leveraging economic data within a broader market analysis framework supports responsible trading practices and provides you with an additional source of information to make better trading decisions.


Remember: Successful forex trading requires a balance of economic insight, technical skill, and disciplined risk management. Stay informed, practice consistently, and adapt your strategies to ever-changing market conditions.

07/01/2025
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