Algorithamic trading in Foreign Exchange
None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames.for shorter time frames (for few days) "Algorithm" can be devised to predict prices.Large and small institutions and professional individual traders have made consistent profits from it.It is understood from the above models that many macroeconomic factors effect the exchange rates and in the end currency prices are a result of dual forces of demand and supply.these two factors are consistently tilting ,and the price of one currency in relation to another shifts accordingly.No other market distills as much of what is going on in the world at any given time as foreign exchange does.
Electronic trading is growing in the FX market,and algorithmic trading is becoming much more common.According to financial consultancy Celent estimates,by 2008 up to 25% of all trades by volume will be executed using algorithm,up from about 18% in 2005 which is a huge development.
