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MAY 25, 2011, 7:08 P.M. EDT
DJ Forex Traders Build Automated Programs
In Search Of Large Payoffs
- Algo trading program creators profit from explosive growth
- Takes years to develop and back-test successful programs
- Myriad ways to sell or share the automated systems
By Stephen L. Bernard
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--As customers in the rapidly
expanding, high-stakes retail foreign-exchange segment seek
out improved trading platforms, entrepreneurs are devising
automated programs to meet that demand.
The quest for the next big advancement in forex trading led to
the recent creation of retail algorithmic trading, systems that
largely automate the process.
One of the biggest problems retail foreign-exchange traders
face is a low rate of success. Rookie traders can see their
investment wiped out in seconds by vicious moves in the
high-risk, high-reward forex market.
Automated systems' key allure is speed, enabling participants
Winsor Hoang, Vancouver, BC, Canada
www.ctsforex.com  (604)603-1889
to get in and out of markets faster than traditional trading,
with the tantalizing promise of rich rewards.
Creators of the robot systems, typically known as "expert advisers," or EAs, say they take years to
develop, from coding to back-testing, to ensure the programs' long-term profitability. Many of the
automatic trading programs, though, fail quickly after creation or never even make it out of the testing
phase because of the low odds of success, creators of the programs said.
A successful automated program, however, can provide a big payoff for the designer because he or
she can profit from using the program to trade personal money, while also sharing the program with
others for a fee.
The Bank for International Settlements said retail trading is the fastest growing segment of the $4
trillion-a-day foreign exchange market, currently accounting for between $125 billion and $150 billion
of daily trading.
If creators of algo-trading programs could capture a fee worth even 0.01% of that daily trading, there's
as much as $15 million a day to be made. Analysts estimate that only about 20% of customers are
using EAs or other automatic trading programs, so growth in the segment is likely to continue to
climb.
Winsor Hoang jumped into the forex market as a typical retail customer, trading on his own. "Several
times," Hoang's accounts "blew up" as he started trading, the Vancouver resident said. That led him
to start developing his own computer programs that would theoretically take the guesswork out of
trading.
Hoang has developed three trading programs, known as Jasmine, Leah and Sienna, since he started
developing the systems in 2007. He uses them to trade his own money, and all three have been
profitable over the past 12 months. The automation now gives Hoang time to go to his local library,
work in his yard and get eight hours of sleep a night, he said. But he warned that even automated
programs are not a cure-all or an easy get-rich-quick scheme.
"All mechanical programs break down at some point," Hoang said. That's why he developed three
programs, so that while one might be losing money, the others are turning profits.
Through sprouting online communities such as Zulu Trade, other retail forex traders can mimic
Hoang's exact trades. When Zulu Trade community members' accounts automatically follow one of
Hoang's trades, he gets a cut of the spread charged on the trade. So far, Hoang has about 1,585
people following his trades on Zulu Trade, with account balances of more than $7 million.
Finding an EA that can last and be consistently profitable is one of the biggest challenges. About
1,000 of the 30,000 customers that can be followed on Zulu Trade are very successful, chief
executive and founder Leon Yohai said. An additional 5,000 or so have performed well, but are too
new to judge their staying power, he added.
Mohamed Hussein, who runs a company called FX Finance in Cairo takes a different approach. His
company has developed EAs, but they are a more traditional money manager, with clients signing up
and Hussein trading on their behalf.
"We are using EAs for more than one year with a positive performance," Hussein said. His company
took more than three years to develop its programs, he added.
-By Stephen L. Bernard, Dow Jones Newswires; 212-416-4528; stephen.bernard@dowjones.com
(END) Dow Jones Newswires
May 25, 2011 19:08 ET (23:08 GMT)
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