So You Want to Trade FX: How Can Algorithmic Trading Elevate Your Trades?

IG Markets - Algorithmic Trading, Algo Trading, Forex, FX, CFDs, Leverage

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Forex, also known as FX (short for foreign exchange), is the trading of currencies. 

FX trades typically involve a pair of national currencies, for example USD/GBP. As we all know from our pre-Covid-19 travels, when the Singapore Dollar strengthens against the foreign currency of the country we are travelling to, it’s time to visit the money changer. FX trading is similar to that, but on a much larger scale.

There are a few reasons why FX trading is attractive and the most widely-traded asset class in financial markets worldwide.

For one, the FX market is open 24/7, so you don’t need to wait for the market to be “open”. The FX market is also HUGE (and this high volume of trading activity also means the FX market has great liquidity) — with a plethora of currencies for you to trade from, and the presence of many big players trading, so it’s natural that traders also want to be part of the action.

Another thing traders like about the forex market is the transparency of the market (it’s affected by world events that are reported on major news networks), and the inability to be manipulated by a single entity because of its sheer size.

Factors that drive currency movements
In addition to world events, other factors that drive currency movements include the country’s inflation rate as this affects purchasing power, interest rates, a country’s debt, foreign trading spending of a country, import/export ratio, economic performance on the world stage, and even government policies and/or sanctions.

In addition, forex’s intraday volatility works in the favour of day-traders or those who want to make quick trades. Traders also have the ability to hedge their trades (due to the opposite movements of the currency pairs), and they are able to use leverage (making bigger trades with less capital on hand).


Speaking of leverage…

When it comes to trading forex, it’s not just about spot (cash) markets. Forex also has derivatives markets that offer more advanced trading products such as contracts-for-difference (CFDs).

In essence, when you buy CFDs, you’re buying the difference in price movements from the point at which the contract is opened to when it is closed. Hence, you are able to speculate on rising or falling prices and go long or short respectively.

Hence, CFDs can be useful in a volatile market situation, since prices can swing both ways. To help you navigate volatility, you can also trade with CFDs that have added in-built risk management features, called Knock-Outs.

In a market as fast-moving and liquid as the forex market, transactions are often completed at a fast pace. Coupled with leverage, CFDs allow you to maximise your capital on hand to increase your total transaction value as you trade on margin — but do note that there are risks involved.

To get started, IG, a leader in the CFD space with over 45 years of experience, is one of the world’s largest CFD providers and regulated by the Monetary Authority of Singapore. Its platform offers $0 commission on all FX CFDs and its markets are open to trade 24/5.

But let’s face it. Most of us aren’t full-time traders and can’t spend our entire day monitoring our trades. Life happens. And we might miss out on trading opportunities while going about your day-to-day activities… or not?


Enter algorithmic trading

Well, you CAN automate your trades, with the use of algorithms (or algos for short). By doing so, you don’t have to do the hard work of monitoring your trades.

What is algo trading?

When a computer programme uses a specific set of instructions or analyses to execute an action (such as a trade), that specific set of instructions is called an algorithm.

Take for example, when you set an alarm on your phone to ring at 7am, 5 days a week. The specific set of instructions to execute this action include triggers (or parameters) such as time, frequency and even the type of alarm tone and volume.

Likewise, an algorithmic trade (algo trade for short) can be automatically executed by pre-defined parameters such as price movements or volatility levels.


IG Markets - Algorithmic Trading, Algo Trading, Forex, FX, CFDs, Leverage


But how exactly does algorithmic trading work and can it elevate your trades?

Here are some advantages of algo trading:
– Automate your trades
– Can also implement stops and limits on your behalf
– Removes emotions from your trades
– Makes trading more systematic
– Removes human error
– Capitalises on opportunities (yes, even that rare market event at 3am)
– Able to monitor all markets
– Low maintenance
– Backtest against historical data to hone your trading strategy

On the IG platform, you are able to create and refine your own trading algorithms. Alternatively, you can use IG’s pre-set algos. Whichever method you prefer, you can trade on IG’s offering of over 17,000 markets.

IG partners with cutting-edge softwares such as ProRealTime (an online charting software with automated trading) and MetaTrader 4 (thousands of indicators at your fingertips) as well as its native APIs (Application Programming Interfaces) that are integrated on the platform for algorithmic trading.

In addition, IG also offers a large array of advanced technical analysis and charting tools, as well as helpful resources such as an IG Academy and the availability of demo accounts.

To find out more about algorithmic trading, download IG’s latest Bloomberg E-book and explore how you can trade FX with different types of algos. 

In addition, you can create an account here. You can also check out IG’s wide array of educational courses and webinars here.


The information in this article is meant for informational purposes only and should not be relied upon as financial advice. Users may wish to approach a financial advisor before relying on any advice provided by the website to make any decision to buy, sell or hold any investment product. Contracts for Difference (CFDs) are speculative products. The leveraged nature of CFDs involves the risk of losing substantially more than your initial investment.

This advertisement has not been reviewed by the Monetary Authority of Singapore.