Basic Components of an Algorithmic Forex System

Basic Components of an Algorithmic Forex System

Automated Forex Trading Systems

The algorithmic system refers to the algorithmic software that helps traders trade, through it. It is also known as the automated trading or algo trading or expert adviser trading. As the name suggests, automated trading is carried out, by the software, already instructed on trading parameters.

One of the most popular trading software used today by the traders is called Metatrader 4, also called MT4 or an expert adviser. What needs to be understood here is that algorithmic software, use the logic and apply the instructions, as defined in its written codes. Not all the traders might like the way Metatrader 4 trades. In such a case, if a trader is affluent in software coding, they can develop their own trading algorithm.

The question here is what are the basic components that one should look for in a trading system before buying one?  FX expert, Kishore M, who also trains people on FX strategies says  “A word of caution here. Shop patiently and see, which software you understand. FX tools and systems can get complicated”.

1) Back test and practice environment – 

For a new trader, who wants to start automated trading, one of the must-have, is a practice environment provided in the software. Before you invest in software, ensure that one of the basic features of the software is a virtual room for you to practice in. You can make mistakes, carry on with trial and errors, rectify mistakes and develop your plans or strategies

2) Easy to read signals –

Check if the codes have been written to make signals easy to read in the software. This is important since automated trading is carried out by the software for you. Unless understood by you as a trader, the whole purpose of

3) Signal Provider Credentials –

Signals being an inevitable component of the Algo trading system, check on the signal provider credentials.  Without a signal service provider, you will not get constant, real-time updates to trade in the FX market. This will ultimately translate to mean lost opportunities.

4) Real time monitoring –

Algorihmic Forex Trading

Check if the software is programmed for real-time monitoring. This is one of the advocated FX strategies of Kishore M. He says that this kind of monitoring, keeps a trader updated, on what is trending in the market. This helps a trader devise his plan of action, effectively. Unless the software is able to stay on top of the trends, pips, price fluctuation, you might end up missing opportunities to make profits.

5) Paring of leading currencies –

FX market trades on two currencies simultaneously. One which is bought and the other which is sold. Check if your trading system offers pairing of leading currencies at any given point in time.

6) Remote access for you to monitor –

If you are interested in trading via an automated system, it can only mean that you probably are not able to spend as much screen time as needed. It is, therefore, safe to conclude that you will trust your system to trade for you. However, many systems allow remote access for you to monitor the automated trading systems. This should be one of the basic components you should look for or include.

7) Link it to the brokerage –

Does your software allow you to link it to the brokerage? Check for this component in  your  FX software. This will not only help you work in sync with your broker and but would also ease the transactional costs, which includes the costs of trading as well as the broker’s commission.

8) Risk Management Capacity-

Last but not the least, check the software for its ability to manage risk. Create pre and post-trade situations for the software to deal with in an appropriate manner. If the software algorithm is not written for it to react in the manner desired, you might look for this component to be customized for you or you may want to develop this on your own.

Components to look for in an Algorithmic FX system

Back test and practice environment

Easy to read signals

Signal provider credentials

Real time monitoring

Paring of leading currencies

Remote access for you to monitor

Link it to the brokerage

Check the software’s risk management capability


An automated FX system trades for on your instructed parameters. This will never mean all profit no loss. However, an automated system might be able to calculate risks faster and increase the probability of making profits better. So choose and scrutinize the components of your trading system, to make your trading easier.


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