Any piece of computer software that buys and sells currencies automatically according to set formulae can be called an automated Forex trading system. These systems operate according to a range pre-determined by the owner of the system who sets the buy and sell parameters. So although a piece of computer software is actually making the trades, you as the owner of the system, still retain control.

Like all computer systems there are both pluses and minuses. One of the biggest pluses is that you can trade 24/7 with an automated Forex trading system and as the Forex market operates 24/7 there is no down time. The other advantage is the ability of the automated system to monitor a greater number of parameters in the Forex market, than can possibly be done manually.

Because Forex trading is growing in popularity there are many different automated Forex trading systems available. However all Forex trading systems tend to fall into two common types, hosted web-based systems and desktop based systems. Desktop systems are stored on your hard drive and you are responsible for all your data and all your data back-ups. This is an important point, as if you choose a desk top system you need to understand that you will need to back-up your data on a regular basis, both for your own information as well as any IRS requirements. And it is important to note that there are many people who have lost all their data due to hard drive failure or computer viruses.

Similar to the desk top system are hosted systems, the difference being that in these systems all the software to run the systems is stored on the host system. In most hosted systems all your data will be stored on the host system as well. Whilst the supplier of a hosted system may also get hit with malicious viruses and hard drive failures, they are likely to have greater disaster recovery plans to enable them to get your system back up again in a hurry, to enable you to keep trading.

However whichever you choose should be determined by your personal needs, the speed and reliability of your internet connection, and whether you want to leave your computer fired up 24/7 to trade.

There are some systems that allow you to choose which option you want to use, and even change options at a later date if your circumstances change. So whichever way you choose to go you need to consider what will work best for your particular needs.

The other difference in the systems are that there are those that you can download for free and those that you have to pay for. Whether you choose a free system or choose to buy a system, is again a choice you have to make. However the one thing you should remember is to check your financial calculations properly before you decide.

There is an argument that says that what you save on the software can be put toward trading. However the other side of that argument is that by using free software you may not get the results you would get if you paid for a better system. There are of course also likely to be deductibles in paying for software.

I believe it is better to look closely at the market and find a system that best suits your needs, and will provide a return on investment. Also look for a system that is proven in both back testing and live simulations.

Whatever you do, think carefully and explore the market before you make a decision on an automated Forex trading system.