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Having written a series of articles on ‘Building Robust FX Trading Systems’ (FX Trader Magazine April 2009 to July 2010), a natural addition to that series is on automation.

In many markets, such as futures, execution is relatively simple.  To sell S&P Futures, there is one central market (the CME) and one rate.  To sell GBPCHF, there are countless brokers, banks and electronic trading platforms you could use, all with potentially differing rates.  You could also sell GBPCHF ‘direct’ or go via ‘the legs’, buying EURGBP and selling EURCHF, or selling GBPUSD and selling USDCHF.

This is what made being a market maker on Foreign Exchange desks in the 80’s and 90’s such an art; not to mention trading over voice brokers where you had to recognise the voice of the broker shouting out the rate you wanted to trade on, amongst half a dozen others, in just one currency pair, with the dealer next to you having a similar number of brokers shouting out prices for the currency pair he traded.

Although the world has come a very long way since those days, FX execution is still very much an art; it’s just evolved.

Today, building a robust and efficient automated trading solution no longer relies on good relationships with your brokers, a keen ear and lightning fast reactions, to hit the best rate before someone else does.  Today it requires the mastery of a new set of computing and technology skills.

With the right software, hardware and knowledge of the market, execution of any FX strategy can be improved and in trading, this can mean the difference between success and failure. Although significant money can be spent on a solution, the following outlines a robust solution within the budget of even most individual traders.


While FX is arguably the most liquid market in the world; this is only true for the major currency pairs, during the London afternoon.  If one wanted to execute EURNOK at 3am in the morning, it certainly wouldn’t hold true.

Currency Pair






Pct of Total Volume






Figure 1

To illustrate this, Figure 1 shows the average volume, by currency pair, for the five most active currency pairs, for the month of July 2013 on the KCG HotSpot electronic trading platform. Figure 2 shows the average volume by hour of the day (EST), reproduced with kind permission of KCG Hotspot. Both of these samples are very indicative of the overall market (See ‘Building Robust FX Trading Systems’).

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Knowing the liquidity and spread for any currency pair at any time of day, is critical information in the execution, and ultimately, the viability, of any trading strategy.  We therefore developed software, in collaboration with Cambridge Trading Research Ltd., to capture, store and chart, both the best bid and best offer, tick by tick, in any currency pair from ‘top of book’ to any depth. (‘Top of book’ refers to the best bid or offer in a market.  For example EURUSD might be 1.31001/1.31006 ‘top of book’ in the interbank market i.e. a spread of only 5/10th of a pip.  However that may only be in 1mio Euros.  If one wanted to execute 10mio, the price would invariably be wider, and wider still for 20mio etc. (We are using ‘top of book’ in this article for illustrative purposes).