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The Sensible Guide to Forex: Safer, Smarter Ways to Survive and Prosper from the Start by Cliff Wachtel

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CHAPTER 10

Alternatives to Traditional Methods

This chapter is specifically for those who are smart enough to know that they need currency diversification, would like some exposure to forex trading (versus more passive long-term buy-and-hold investing) but are:

  • Unable or unwilling to do their own forex trading.
  • Seeking simpler, less time-consuming, lower-risk trading methods than those we've covered thus far.

In this chapter we present the more traditional alternatives for those seeking currency exposure and diversification with less risk, time, and effort.

  • Auto-trading systems.
  • Currency funds.
  • Managed currency accounts.

Then in Chapter 11, for the first time in any forex book, we'll look at two newer, smarter, easier, and less demanding ways to get forex exposure.

AUTO-TRADING SYSTEMS: WELCOME TO THE MACHINE

As the name implies, automated trading or algorithmic systems go beyond mere testing of systems to actually applying them in real time to make real trades with live market data. When the programmed system generates a buy or sell signal, the software automatically places the trade. These systems have been widely used by institutional traders for many years in all financial markets. In recent years more affordable versions have become much more popular with private traders, particularly those with programming and testing expertise, or the means to hire it.

Assuming the system is well designed, it is back tested, and its performance is monitored, programmed trading has some ...

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