Andy Webb
Andy Webb

Unlocking the nature of FX Algorithms

What types of algorithm are likely to prove popular in the FX environment and what hurdles may need to be overcome if FX algorithms are to take off? Andy Webb investigates.

First Published: e-Forex Magazine 24 / Algorithmic FX Trading / July, 2006

Greater adoption of algorithmic trading for FX has been a popular prediction for some time. But what types of algorithm are likely to prove popular in the FX environment and what hurdles may need to be overcome if FX algorithms are to take off? Andy Webb investigates.At first glance, it might seem that algorithmic FX trading for major currency pairs is an irrelevance. Finding the liquidity that sometimes proves elusive in equity markets isn’t much of an issue. A trader trying to fill a reasonably sized order in EURUSD on a venue such as EBS shouldn’t have to struggle too hard.Buyside hurdlesMost industry experts accept this point, and definitely see it as a factor in the relatively slow uptake of algorithmic trading in FX. “If trading a really liquid pair, such as EURUSD, you don’t really need to be doing anything particularly sophisticated in terms of execution algorithms,” says Andrew Yao, FX product manager at Portware.“When the size is substantial, quite a few...continued

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