Table of Contents
Affiliate Disclosure
Affiliate Disclosure adheres to strict guidelines to preserve editorial integrity to help you make decisions with confidence. Some of the reviews and content we feature on this site are supported by affiliate partnerships from which this website may receive money. This may impact how, where and which companies / services we review and write about. Our team of experts work to continually re-evaluate the reviews and information we provide on all the top Forex / CFD brokerages featured here. Our research focuses heavily on the broker’s custody of client deposits and the breadth of its client offering. Safety is evaluated by quality and length of the broker's track record, plus the scope of regulatory standing. Major factors in determining the quality of a broker’s offer include the cost of trading, the range of instruments available to trade, and general ease of use regarding execution and market information.

Top Strategies for Forex Algorithmic Trading

Trading on the foreign exchange market has seen some pretty drastic changes over the years. The technological advancements of today have been revolutionary in every aspect of everyday life, and forex trading is no exception.

Top Forex Brokers

    While trading in the past was done primarily over a phone cable, the easy access to a computer and internet connection has made things much more straightforward. Traders nowadays require real-time visibility into all the necessary information to make decisions and create institutional Forex trading strategies.

    Modern technology allows us to use AI tools to improve our chances in the forex market. One of the biggest game-changers in the trading market has been the introduction of algorithmic trading. By applying different techniques, traders are able to achieve high-frequency currency trading with the help of different software and programming languages like Python. These are trading systems that work with a high level of success and profitability. Even though algo trading forex on the market is not a 100% winning strategy, it does great to reduce costs and minimize the risk.

    What are the 4 Types of Algorithmic Trading?

    Broadly speaking, there are 4 main types of algorithmic trading that you can adopt:

    • Statistical As the name says, this type relies purely on stats from historical data to learn from past experiences. Systems with statistical algo trading are always looking for opportunities in situations that have proven to be successful in the past.
    • Auto-hedging This is a safer and more conservative approach whose main goal is to reduce risk rather than increase profit. It relies on investing in the opposite position of your main related asset.
    • Algorithmic execution strategies These strategies are used to improve the efficiency of executing a specific trading objective. It can be anything that you want to achieve quickly and certainly like reducing the market impact or finalizing a trade.
    • Direct market access It is essentially an order book that allows traders to quickly place trades. It gives them direct access and better visibility into the stock exchange with important information like prices and volumes.

    While it is not considered a type, high-frequency trading is another form of algo trading. It gives the traders the ability to perform trades within milliseconds of a price change. When properly used it can be quite advantageous, though it raises a few risks on the more volatile markets.

    The 3 Best Algorithmic Trading Strategies to Follow

    1. Trend Following Algorithm

    One of the most popular algo trading strategies is the trend following algorithm. It relies on following a forex indicator that shows trends in different parameters like price changes, channel breakouts, and average statistics. It is used by a solid percentage of forex traders as it is easy to adopt and does not require you to perform predictive analysis, which can be quite complicated to do as a beginner or intermediate trader. Consider checking out a list of the top forex automated platforms where you can make the most of this strategy.

    2. Arbitrage Opportunities

    In simple terms, arbitrage is investing in stocks at a low price on one market and selling them at a higher price on another. Situations like this can often be found on the forex market as well, and with this strategy, you can make the most of them. You just need to set the right currency trading algorithms in place that will automatically identify opportunities for arbitrage and place the orders when they are taking place. Brokers like AvaTrade offer educational material on trading strategies like these, read our AvaTrade review to learn more.

    3. Trading Range

    Also known as the mean reversion strategy, the trading range strategy is based on the idea that all assets have a normal price in normal circumstances called the “mean value”. This price periodically increases and decreases, but eventually reverts to the mean value at some point. By setting up a price range for the average value and implementing an algorithm to place orders when this value moves out of range, you can capitalize on trading this asset.

    What Is the Future of Algorithmic Trading?

    Algorithmic trading is currently on the rise, and yet the client expectations for it are becoming even more demanding and complex. Namely, there are a few things that can be improved and upgraded to better meet the criteria of the modern trader. Trading systems need to be able to provide more information to their clients in real-time—this way, traders will have the necessary insights to make better decisions when choosing the algorithms for a successful strategy. Additionally, by focusing on real-time information, transaction cost analyses will become significantly more practical.

    Traders should have access to smart algorithms that will react to different market conditions. In order to get the information they need, traders require modern tools that rely on AI and machine learning. These modern technologies have the capability to create new parameters which can be useful to create a winning strategy and implement the best algorithms for specific market conditions. Algorithmic trading is not going away anywhere in the near future, so an increased development of AI-powered tools is to be expected in the near future.

    If you need more help with your forex journey, take a look at our free daily forex signals or weekly forex forecast.

    You might also be interested in reading the below articles:


    What is the best language for algo trading?


    While there is no best language, Python and C# rank among the preferred ones for Forex algorithms for trading strategies.

    How do I create my own trading algorithm?


    Traders should have a profitable strategy and either learn a coding language, hire a developer, partner with one, or have a code-free solution.

    What software do traders use?


    It depends on individual preferences, but Python and C# rank among the most-used languages for algorithmic traders, with software running on Windows-based systems.

    Do day traders use algorithms?


    Many profitable traders use algorithms, as manual trading places them at a competitive disadvantage.

    Which is the best algorithmic trading platform?


    MT4 is the leading algorithmic trading platform and the best choice for traders using Forex algorithms for trading strategies. It fully supports API trading and VPS hosting.

    Which trading algorithm is most efficient?


    No algorithm qualifies as the most efficient. Various market conditions require a different approach. Therefore, profitable traders have numerous algorithms that adapt or apply to the market. The rise of machine learning and AI has improved the decision-making process and allowed fully autonomous trading solutions that can react to market changes in real time. Team
    About Team
    The team is comprised of analysts and researchers from around the world who watch the market throughout the day to provide you with unique perspectives and helpful analysis that can help improve your Forex trading.

    Most Visited Forex Broker Reviews