What Is An EA In Forex? In the world of forex, an EA is Expert Advisor, software program that informs you when to make a trade or sometimes the program initiates automatically and executes trading according to instructions previously programmed in it.
Profiting from forex (foreign exchange trading) will require you to undertake in-depth technical analysis, carry out substantial fundamental analysis, regularly follow the news and attach yourself to a monitor to view the price charts.
Almost every trader understands the fact that it is very difficult and can lead to burnout resulting in a loss rather than profiting. This realization has surfaced automatic trading technologies that make trading easy and increases the probability to get more profits.
An expert advisor is often deployed on MetaTrader 4 (MT4) or MetaTrader 5 (MT5) foreign exchange trading platforms. You can either create your own expert advisor or use an existing one. These are written in a programmable language called MQL (Meta Quotes Language).
Advantages Of Having An EA:
Forex markets remain open for an entire 24 hours and 7 days a week. By using an EA you can have the liberty to carry out trading opportunities even when you are not present on the scene such as when you are asleep or occupied in some work.
Using an EA will detach any emotional attachment from your trading. Your greed or fear won’t become a barrier in choosing or declining to trade signals. As per your instructions, the EA will perform the trades without taking into consideration how it might weather a loss or spend a profit. You can follow EA only to manage money
An EA can process far more variables at one time that you can ever imagine. It has the ability to consider those variables along with several currency pairs all at the same moment. It doesn’t matter how intelligent you are but you cannot perform similarly.
If you are trading forex and it is your only income generator, using an EA could help you in reducing the stress levels because the EA will relieve you from all the mental exhaustion that is required to build a successful enterprise.
Disadvantages Of Having An EA:
An important aspect that differentiates a human from a robot is that the former can react to real-life situations whereas the later will follow the orders.
If your EA cannot respond to current news then it might ignore the fundamental reason whether to make a trade or not to. But if you were at the desk and watching the news, you may probably avoid such mistakes.
Even though your EA can manage more variables in a single moment than you, it will act accordingly to your programmed schedule. You may not be flexible in your thinking but you can respond to certain variables within your parameters. Sometimes that might be necessary to keep away from making a huge trading error or maybe taking advantage of an outstanding opportunity.
Unlike an online trading platform, you have to install the program in your system. That means you can access the program only in the device you had installed. You EA can run when that system will be turned on with MT4 running and have access to the internet.
The Significance Of Testing An EA:
Whether you create your own EA or use someone else’s, it is very important to test it on various time frames. Test it on a practice account that does not put real money at stake, so as to find out its ability to perform. For instance, you may find out that it performs well on definite currency pairs and not on others.
If you are using your own programmed EA, be prepared to devious with the variables occasionally. Market trends will fluctuate from time to time and so your program has to make necessary alterations.
Remember that the forex market is highly unregulated and vulnerable to scammers if you are using an expert advisor from a firm or from any other individual. Beware of commitments that promise higher returns from EA creators. You must realize many scammers will understand that overpromising will be a red flag and an expert advisor provider may also be a scammer if he tries to balance credibility and hope.
How Does An EA Works?
Typically an EA works by using predetermined rules or strategies for building trade decisions. These set of rules are programmed in a robot which automatically enters and exits forex trading. With embedded strategies, the EA will be capable of implementing trade decisions in such a way that humans cannot.
Some of them are programmed in such a robust way that they can effectively and thoroughly scan an entire market looking for chances with a high level of accuracy rather than humans.
For example, if you have developed a successful strategy on trading that relies heavily on candlestick patterns, indicators, resistance levels, support or other things, you can program them on the EA. After that just relax and sit back to watch your computer program do the hard work.
Moreover, if your EA is programmed to perform a sell whenever a pair reaches a certain resistance level, the EA will abide by that instruction always. If you want to make any amendments, you can simply open your coding and include your desired parameters.
The targets for trading are also encoded into the program. Almost every automated trading strategy includes a takeaway profit and stops loss level that helps to safeguard profits with prevention for an extensive loss.
Why Are EA’s Popular?
An expert advisor is popular because of the following reasons.
Flexibility – The ability to construct complex algorithms to track different markets makes them a powerful tool.
Accessibility – The easy access of the EA is probably one of the biggest reasons for their acceptance as an automated trading instrument.
Trading emotionless – Making your forex trading automated will take away your emotions while making a decision because an algorithm only recognizes the market as per program.
Saving time – An EA can monitor thousands of markets worldwide, which means you don’t have to watch the market 24 hours a day.
With an EA in forex trading, you can trade multiple instruments non-stop, eliminate any emotion linked trading decisions and diminish trading errors.