A Move to Bridge Forex and Stock Trading Together

This is Davey once again and I welcome you to my forex blog. Today, I’ll still be talking about forex algorithms and how it imitates equities trading in terms of trading platforms with greater transparency, high speed, and low costs.

Forex and Stock Trading

Stocks and forex are considered as different classes of assets because each of them has their own execution levels, customer demands, and trading procedures. However, there are some brokers who are moving these two together primarily because their clients are asking to synchronize the two assets and be administered by the same broker.

As the foreign currency market becomes sophisticated, it seems natural for it to be harmonized with equities as forex operations continue to grow. By moving the two together, it is hoped that trading will become more transparent, speedier, and less expensive. Forex algorithms are now able to search for the best price and instantly execute a forex trade according to previously set up parameters. Because of these algorithms, it is now possible to efficiently and inexpensively trade foreign currency pairs.

A lot of international traders are actually doing it. While investing in foreign equities, they’re also investing on forex positions of the foreign currency related to the equities for hedging purposes. This strategy is able to lock in any possible profits at the most profitable exchange rate. Doing this also enables traders to take advantage of ECN executions, order flow, and algorithmic trading which became popular in stock trading along with transaction cost analysis of forex trading. In fact, huge investment firms are already executing this kind of strategy. The companies have both equities and forex trading desks under one department.

The Development of Algorithmic Trading

Algorithmic trading is relatively new and only about 5% of forex traders use this kind of trading. Not many forex traders know that algorithmic trading has its roots from stock trading. With just 5% of the total forex trader population using algorithmic trading, it has without a doubt a lot of room for expansion. Currently, some 50% of equities trading are done using algorithms. If more forex traders take advantage of algorithmic trading, it is expected for the forex trade life cycle to be optimized just like that of equities trading. With the continuous use of electronic forex trading platforms, brokers see a centralized relationship between forex and stock trading. Add to that the fact that there is also a push to regulate and modernize forex trading platforms to make them more transparent.

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