Getting Started in Currency Trading, + Companion Website: Winning in Today's Market, 4th Edition

Chapter 26

Computer Trading

Introduction

Computers and FOREX is a match made in heaven. Without computers and the Internet, there would be no online retail FOREX trading.

This chapter is optional for the novice currency trader, although investors with some trading experience will find it informative. All traders should at least be aware of advanced FOREX techniques using computers. The intense ongoing market research is destined to eventually affect even the smallest traders. High-frequency and ultra-high-frequency trading, mentioned in the third edition of Getting Started in Currency Trading is now the talk of—and for many, the worry of—the town.

Technical Analysis

Technical analysis is the preferred trading method for many traders, big and small, institutional and individual. See Chapter 12, “Technical Analysis,” for a summary of technical analysis ideas.

Computers are an obvious aid to doing technical analysis studies, both for finding new methods and testing old ones. A computer can help in two areas. Complicated ideas and data sets can be easily manipulated by a computer. A computer can test a trading method quickly and over an extensive database of historical prices for a wide range of currency pairs and market environments. This is a good check on the human mind’s tendency to generalize with limited data.

The power of computers has increased many-fold over the past 40 years. I began research in 1974 with a Data General Super Nova, a $70,000 mini-computer, which would be ...