In the forex market, forex expert advisors refer to programmed automatic trading software, which is usually written with the help of the MQL4 programming language. It is designed to automate the opening and closing of trades on the trader’s behalf. It basically consists of a piece of code, featuring an algorithm. This allows the trader to alter cease loss, trailing stop and take profit ranges, keeping in line with the pre-defined parameters.
An Insight into Forex Expert Advisors
An EA first tests whether there is any fairness in the trader’s account to open a trade. It will not run if it does not detect it. The EA then checks the assigned tick of the currency pairs it will trade on, via the codes and guidelines set before. It will then confirm whether the trade entry standards have been met or not. If open trades exist already, the EA will then check whether all existing standards, including stop-loss and take profit standards, have been met.
The EA operates on a 24-hour basis. It requires a PC, tablet or mobile device with a very consistent internet connection.
How to Program a technique into an Expert Advisor
Expert advisors can use many alternative strategies to earn profits. This includes methods such as grid methods, hedging methods, reverse martingale and martingale, trend following and correlation strategies. Expert Advisors can trade breakouts, using information bulletins and can even use scalping.
How Traditional EAs Trade
Traditional EAs tend to enter trades when there is an excessive chance setup. Many of them include trailing stop losses, which help the trader to lock in income. They are programmed to observe the general market circumstances, looking for reversals. If a reversal is found, the EA shuts all trades instantly to lock in income.
Many EAs can trade multiple pairs simultaneously. They can also monitor a number of timeframes without any delay, providing traders with a variety of options when selecting a particular market trend. Traders should thus select EAs which is suitable for the type of trading they normally practice.
Almost All EAs allow traders to change their risk settings. A trader can thus play around with their risk settings in a live trading environment, to get a better feel for the Expert advisor in question. This would give the trader the confidence to ride out any future losing streak.
How to Improve the Performance of an Expert Advisor?
There are some measures that can be taken to improve the performance of an Expert Advisor. Some of them are mentioned in the brief below.
- Having an Exit Plan: Having an exit plan handy to safeguard against changing market conditions is as important as identifying market conditions initially. Traders should thus plan beforehand what they will do in an adverse situation, whether they reduce their trading size, or cut their losses completely. An exit plan is thus critical to stay on top of any adverse circumstances that the market might endure.
- Using Non-Co-related EAs: Traders should always try to use multiple non-correlated EAs, across different currency pairs, strategies and timeframes. The more the trader diversifies his/her basket of EAs, the more robust the trading would become. An ideal situation would be one EA offsetting the performance of another to produce a steadily growing equity curve.
- Trading Less When in a drawdown: Another good practice for traders is to cut the size of their trades when the EA is experiencing a drawdown. Instead of a handoff approach, traders should be aware when their EA is going through a losing period and cut the size of trades accordingly.
Conclusion
It is critical for a trader to understand the strengths and weaknesses of forex expert advisors before exposing it to a live trading environment using real money. There are various types of Expert Advisors available in the market, each claiming that they provide the best profits. However, in this day and age of frauds and scams, it is important to look at each choice for signs of legitimacy. Taking a look at the developer’s background, the trading strategies used or examining the back-tests could provide the basis for taking a well-informed decision.
