Here is the translated HTML content in English, with standard decoding applied, keeping the HTML format and without adding line breaks: Occasionally I’ll borrow the power of ChatGPT, part 16 - EA Beginner Course - Navi+ - GogoJungle | Auto Trading - Market Analysis

FX automated trading, the double-e now in Reiwa era is the EA developer.

Sometimes I’ll also borrow the power of ChatGPT (lol).

It’s by no means that I’m running out of ideas,

I have many rough notes and drafts,

and since整理するのが面倒くさくて I dumped them all (lol).

※This time, please note that my personal views as ChatGPT are mixed in with various information.

Will an increase in EA users affect its edge? Considerations from a skeptical perspective

This time, I’ll talk about whether the increase in FX automated trading (EA) users affects its edge.

In the FX industry, when many people use EAs, it is sometimes said that “the edge of EAs diminishes,” but

I’m somewhat skeptical about this.

Understanding how the edge of EA operation is affected by the order-fulfillment system of FX companies is the starting point for this discussion.

FX company order processing – the roles of LPs and the interbank market

First, a brief touch on how FX companies (brokers) process orders.

FX companies may directly “swallow” user orders, or they may pass those orders to LPs (liquidity providers).

LPs then access the interbank market, and large orders are typically processed in the interbank market.

Here, small retail orders of 1000 or 10,000 units do not flow directly to the interbank market,

and FX companies often aggregate these orders and submit them to LPs in larger blocks, such as 1 million units.

It is also said that LPs themselves may trade with leverage up to 100x.

In other words, small individual EA orders do not flow directly into the interbank market as-is;

they are processed in aggregated form by the FX company, which means the timing of an EA’s order does not necessarily coincide with the market impact time.

Reasons why increasing EA users has little impact on edge

Next, I’ll list several reasons why the impact on the edge is skeptical even if the number of EA users increases.

1. The impact of individual EAs’ orders on the market is small

Individual traders using EAs typically place orders of 1000 or 10,000 units, and those orders rarely flow directly into the interbank market. FX companies aggregate these orders and submit them to the market in sizable blocks, so it’s hard to imagine a single small order having a large market impact.

Furthermore, the FX market itself is highly liquid, and major currency pairs (USD/JPY, EUR/USD, etc.) see trillions of dollars traded daily, so individual investors using EAs hardly affect the overall market.

2. The timing of orders is not unified

Even if the number of EA users increases, it doesn’t mean all EAs place orders at the same time. EAs have various logics and enter/exit under different conditions, so it’s rare for orders to cluster simultaneously in the market.

Even if multiple traders use EAs with the same logic, if they run on different brokers or in different environments, slight discrepancies arise. Therefore, it’s unlikely that all EAs enter at the same time and move the market.

3. The roles of market makers and LPs

Some FX brokers are market makers. These firms may swallow retail orders within their own system rather than pass them to the interbank market. In market-maker type firms, traders’ orders do not directly reflect in the market, so increasing EA users has little direct market impact.

Also, LPs aggregate large numbers of orders to the market, so the timing of when an EA’s small order becomes an LP’s market-facing order does not always align with the EA’s trade timing.

4. The spread of automated trading is an evolution for the whole industry

The broader adoption of automated trading is an evolution of the industry and may work in favor of individual investors. With more EA developers entering the market and various logics and methods developing, new operation models and risk management approaches arise, contributing to market efficiency.

For example, if AI techniques and big data-enabled EAs appear, more sophisticated trading becomes possible, and rather than diminishing each EA’s edge, there is even potential for it to improve.

Conclusion – skepticism about edges diminishing as EA users increase

Regarding the view that increasing EA users would diminish its edge, I am skeptical.

Considering the size and liquidity of the FX market, the order-processing mechanisms of FX companies, and timing differences and different logics among EAs,

I think the potential for EA users to have a large impact on the market is low.

Rather, the spread of automated trading is likely to foster the industry’s development and provide new opportunities for individual investors.

Using EAs is also a very effective approach for asset management moving forward, and

I believe many people will continue to benefit from it.

Now, please continue to have a great trading life!

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【Reiwa’s Double-E EA Listing】

https://www.gogojungle.co.jp/users/112481/products

Real account performance of the USD/JPY EA

https://real-trade.tech/accounts/73791?via=users_realtrade

Specifically, categorized the Reiwa’s Double-E EAs by genre

https://www.gogojungle.co.jp/finance/navi/articles/67162