Algorithmic Trading Set to Take Over Forex

by on May 31, 2014 5:41 am BST

Amid the scrutiny of high frequency trading, algorithmic trading has moved from, primarily, the equity market and is beginning to flood the currency market. According to Molten Markets Inc., algorithmic trading with begin to completely phase out voice orders conducted over a line of communication.

Simon Wilson-Taylor of Molten Markets said “we’re on the edge of a huge growth in algorithms,” during the Profit & Loss Forex Network conference in New York. Algorithms, or commonly referred to as “algos,” were not too common in forex. And those that were available were not as sophisticated as those seen in other asset classes.

Technology is beginning to phase out human traders in the forex markets, too. The worldwide probe into foreign exchange manipulation has greatly hurt the largest trading market in the world. By switching to algos, institutions can aim to eliminate human inefficiency, potential manipulation and help to reduce costs in the low-margin market.

Algo trading has is expected to rise by 18 percent this year for institutional market players, according to Greenwich Associates LLC. The growth is seen in hedge funds, which executed roughly 53 percent of their volume within the last year opposed to corporate volume of three percent.

As soon as you realize you have to trade your orders throughout the day to get your job done, you want to automate that,” said Wilson-Taylor.