Whether you are a novice forex trader or an experienced trader, who doesn’t want some technological tools that can make the trading process easy, right? What if you can get trade signals and timings to trade in a way that you can have more odds of winning?
Expert advisor (EA) or FX trading advisor is the form of software that can automatically initiate your trade, enter and exit a trade as per the programming instructions set in the software. The Metatrader’s forex currency trade advisors are written in a coding language named MetaQuotes Language (MQL), developed by a company called MetaQuotes Software Corp.
These forex currency trade advisors are mostly deployed on forex trading platforms like MetaTrader 4 or 5. Traders have the option to choose an existing EA or can build one as per their chosen trading platforms. More information you can read in our article MetaQuotes Language mql4 mql5 Review.
Trading signals are automatically generated by the fx trading advisor, and the trader is also informed of opportunities in trading. A Forex robot is also an automated system for trading like the EA. However, while the Forex robot can trade automatically on behalf of the trader, for an EA the trader has to manually authorize the trade.
The rules of every EA are clearly defined, yet the different EAs available may differ in the rules which they use for trading. One of the main advantages of using automated software is that they prevent the trader from making irrational decisions based on his emotions. This is a common problem for inexperienced and new traders. The forex EA has to strictly adhere to the rules specified, and there is no human interference.
What Are the Benefits of Using a FX Trading Advisor?
Once you know what is an EA in forex, it is useful to know what are the benefits that you can get as a forex trader by using this tool. Forex markets remain open for 24 hours; it starts on Sunday at 5 pm EST and closes on Friday at 4 pm EST. But as it runs from different markets across the globe, it can be said that it remains open for all seven days. So, there are ample opportunities for forex traders to use an EA and churn the profit as it is automated and would work even if a trader is sleeping!
Removes the Emotional Baggage
Using an FX trading advisor helps traders remove the emotional factor involved in their trading. Many times, traders fear and overthink about them winning or losing trades and make mistakes as a result. Here, trading is done by an EA, and thus this emotional baggage doesn’t interfere with the trading. The EA trades as per the instructions set by you to earn the specific target. Even if the trade turns out to be losing, it will make the appropriate decision based on the programming code set by you.
If you are a day trader in the forex market, trading would be your bread and butter. Thus, choosing the right pair of currencies and making trades profitable can have immense pressure on your mind. Using an EA can help you reduce obviate stress while trading. It saves you from getting exhausted with emotions in trading. Also, here only programming the EA takes time as the trades are automated.
Gives Vivid Trading Variables
As a human, there are certain limitations in choosing and applying variables in trading, but with the forex currency trade advisor, there are no limitations. The EA can mix and match numerous variables at the same time and can help you choose the best possible currency pairs at the most suitable time. It saves time and gives vivid scenarios to trade.
What are the functions of the forex trading advisor EA?
There are many different ways that the best EAs for Forex can be programmed. They may use specific technical indicators like the indicator for moving average, or convergence/divergence of moving average, or use breaking news, trends. The EA will analyze the different indicators, specific financial instruments to decide whether there is an opportunity to make a profit trading. Forex robots are a type of EA, though no manual approval is required for trades. In addition to signal generation, the EA has other features. In some cases, the EA will trade control of the trader’s account. They will check the balance in the forex account, to decide how much can be traded. Usually, only one to two percent is considered for trading.
The EA may review the trades to decide whether a stop loss, take profit or trailing stop will be the best decision. In addition to the trades closed, the current market conditions are also considered by the EA. Only when signals are favorable, the trader will be notified
Important information for traders launching their EA
Some traders prefer to use the Forex EA generator which generates the EA program automatically if the preferred trade parameters are entered. Some tips for traders who wish to create their own EA, which will help them make it work properly are described below.
Why data is important for forex trading advisor
Traders should be aware that back-testing results are not very reliable and good results are not proof that the system is perfect. The results depend on the backtest data quality, so if data is not accurate, the result is unreliable. By default for MT4, MT5, the best quality for modeling is 90% accurate. However, this may result in major differences in the back-testing and live results, especially for shorter periods. To overcome this problem, historical data can be used, and processed for use with Metatrader following the instructions provided.
Understanding execution speed
The trader should also understand his execution speed to adjust the EA for trading a live forex account. If the MT4 and MT5 accounts are not used for 30 seconds, a trading session will time out if a free forex EA is being used. So the trader will have to login again using his password and user name. This process of logging in will take some time, depending on the speed of the internet connection. In some cases it may take a few seconds. While this may not appear to be significant for most trades, if the market is very volatile, this will affect the result of the trade.
Traders are aware that debugging the code is difficult for a complex EA for MT4, developed after spending a lot of time. Metaquotes, the developer for MT4, MT5, is focusing more on the requirements of the forex brokers and does not provide a debugger tool for detecting any EA problem. Even if a paid EA is used, no tool will be provided. One way to fix this problem is to incorporate print functions in the code, though this may be difficult if the EA code contains thousands of lines. Microsoft Debug-view can be used to analyze a log that is well-formatted and is easily downloaded.
Testing MetaTrader connection
Before using the EA, the Metatrader connection should also be checked. Only if the MetaTrader platform is switched on and has a direct broker connection, the EA can be run. Though MT4, MT4 is designed so that they will automatically try to reconnect, often traders face problems. Some traders have a number of MetaTrader accounts, due to which the wrong password is used for reconnecting. This problem can be overcome, deleting the unused account. Some traders may feel frustrated if their server connection is disconnected, and they cannot use EA.
How Do MetaTrader Expert Advisors Work?
There are many MT4 & MT5 expert advisors written since anyone subscribing can do so. A few are developed only for trading news events and remain idle otherwise. Other EAs will remain active all the time. Forex traders use their experience to develop a custom EA for automating trading, hiring programmers specializing in MQL4 to write the code. Every EA has a similar purpose of automated Forex trading to make a profit after using technical indicators for gauging market conditions. The EA should be attached to the MT4 platform chart before it can be used. The EA for MT4 or MT5 will consider at least a few dozen factors to decide what the next decision should be. This ability to consider a wide range of factors rationally can help traders to make a good profit
Running more than one EA at a time
Traders should be aware that they can have multiple EAs running on the Metatrader terminal at the same time. However, not all EAs will function together since some EA may try to act on the open trades of other EAs. To prevent this the programmer will modify the EA code so that they do not function at the same time. Also, only one EA can communicate with the trading server at a time. If multiple EAs are active, they may not be able to communicate.
Are There Any Shortcomings to Using an EA?
The shortcomings here are more of how you have programmed the EA as an EA runs literally on your instructions. So, if your EA doesn’t cop up properly with the real-time news, it would lose out on fundamental reasons to choose a trade.
Also, EA can definitely give various variables at the same time, but it would trade only those scenarios that you have programmed it for. Whereas in manual human trading, this is not the case. You can be flexible with your trade and may pursue risk if a trade is outside your trading scenarios but is profitable overall. Needless to say, but an EA is a software at the end, and technical errors are not new.
Research Well and Test Your EA
If you build your own EA or use an already existent EA, it is of at most important to test it frequently and thoroughly. Though try it on a practice account, so you do not lose your real money. It would help you identify its strengths and weaknesses like in which currency pairs it works better and at what time it shows the most powerful results.
Also, if you have built your own FX trading advisor, you have to be aware of the changes taking place in the financial market and make the changes in your EA as well; otherwise, it would get out of date and may not show accurate outcomes.
The most important thing to act if you are using a firm or an individual’s EA is to be hyperactive and self-aware. Your lack of focus can make you prone to scams and frauds as many individuals are ready to snatch you in “get money doubled” kind of schemes. Too optimistic results in a short time are not possible, consider it as a red flag. Use EA from reputed and credible sources only even if that means paying a little extra.
You should also do your own research before opting for an FX trading advisor and have reasonable expectations only. Trading using an EA can give you significant profits if you have chosen or programmed it well; it all depends on your research and skills at the end.