Expert Advisors, or EAs, are a household name in the forex market. Many traders use them and swear by their effectiveness at turning in profits.
Despite their widespread use, not every trader is familiar with EAs and how they work. There are many misconceptions about EAs that can lead to inaccurate and often misleading depictions.
This article will help you better understand what an Expert Advisor is, how to use one, and how to choose an EA that works for you.
What Are Expert Advisors?
Expert Advisors are automated trading programs installed on your broker’s platform to help you manage your trades.
EAs analyze market data, identify patterns, and generate trading signals based on these. Traders use these signals to help them make better, data-based trading decisions.
An Expert Advisor is a software program. It doesn’t require sleep, rest, or food, and it doesn’t get tired from watching market movements 24/7. It can also process large data volumes significantly faster than human market analysts without experiencing fatigue.
These traits make EAs ideal trading partners for traders who can’t afford to keep a vigil on their computer screens watching graphs all day.
EA vs. Trading Robot
If Expert Advisors are trading software programs, you might be wondering how they differ from trading robots.
The answer is that both are Expert Advisors. Their difference lies in the extent of what they can do.
Trading robots can do everything that an Expert Advisor can do. They can analyze market data, identify patterns, and generate trading signals.
However, there is one thing trading robots can do that an EA can’t – execute and manage trades on your behalf.
Expert Advisors that aren’t trading robots will always need a human trader to carry out trades manually.
How Expert Advisors Work
As software programs, EAs operate on a predetermined set of rules. How an EA is programmed determines how it works.
Some Expert Advisors are designed to help trade news events, while some are programmed to assist traders in identifying specific patterns and generating signals for these.
Trading robots – EAs with trade execution capabilities – generally work following preprogrammed criteria and carrying out trades when market conditions meet these criteria.
How to Use Expert Advisors
Running an existing Expert Advisor on your broker’s platform is drastically easier than creating one yourself.
In particular, using an EA on the MetaTrader 4 platform is simple and straightforward.
Simply follow the steps below.
1. Install the Expert Advisor you want to use on the MetaTrader 4 platform.
2. Customize its settings according to your preferences and trading strategy.
3. Once you finish the EA configuration, activate it to start automating your trades.
After this, your Expert Advisor will begin monitoring the markets and generating tradingsignals. If it’s a trading robot, it will carry out and manage your trades based on your preset criteria.
You must regularly check your Expert Advisor to ensure it’s working properly and adjust its settings as market conditions change.
Should You Use Expert Advisors?
There are benefits and drawbacks to using Expert Advisors.
The advantages of relying on Expert Advisors include:
• It prevents emotions from affecting your trading decisions.
• EAs are better and more efficient at monitoring markets and identifying trading opportunities.
• Using Expert Advisors improves your trading speed.
However, EAs also have disadvantages, such as:
• EAs are vulnerable to mechanical problems (e.g., software bugs, glitches, etc.).
• You can fall prey to overoptimization.
• Automated trading is not as adaptable to real-time news as human traders.
Pros and cons aside, using Expert Advisors in ideal market conditions can bring you larger returns than a manual trader, provided you use your EA correctly.
Deciding whether you should use an EA is ultimately a personal preference. If you think that you’re a disciplined trader and can strictly adhere to your trading plan regardless of market conditions, then manual trading can be suitable for you.
On the other hand, if you value the superior speed that EAs afford, want to eliminate emotional bias in trading, and have a tried-and-tested trading strategy, using an EA can be a good choice.
Choosing the Right Expert Advisors
Using Expert Advisors can potentially help you make more money from your trades. However, not all EAs are created equal, and the financial markets are also home to disreputable individuals wanting to take advantage of less knowledgeable traders.
Doing proper research before purchasing EA software is crucial. Always check the reviews of the EA you’re thinking of buying first, and only buy from reputable vendors or traders.
Make sure to check the currency pairs available in the EAyou’re buying, too, as there is no EA in the market that offers every single currency.
If you’re in the market for a reliable and effective Expert Advisor, check out TradeBot, a proprietary trading robot from Tech-RMS.
