Forex Expert Advisors – are automatic trading systems which control your trades based on internal predefined algorithms.
Over the past century, the general principles of trading haven’t changed a whole lot. Long term success is always with the trader that manages to make more gains than losses. The leaders of the market have changed and interchanged, and new technical tools were devised. However, with the onset of the age of personal computers, the mechanics of decision making in trading began to change drastically.
In the 70s and 80s trading professionals began actively using PCs to analyze information from exchanges. By the early 90s many user programs allowed to not only analyze and feed market data, but to also begin automating decision making.
Nowadays, something that was previously only accessible to a select few traders from Wall Street is becoming increasingly popular, that is – using Expert Advisors.
So what is an Expert Advisor?
An Expert Advisor (also known as trading robots) are usually programs/plugins that do the following:
1) Process market quotes from your price feed
2) Conduct technical analysis of this market data
3) Inform you of trade opportunities with signals, or open and manage trades automatically on your behalf.
The main basis of building an expert advisor is having a trading strategy – a set of trading rules which, if followed will provide you with a steady and positive win/loss ratio.
What are the advantages of using Expert Advisors?
First off, you need to understand that a Forex robot is a software piece, which is not affected by any of the typical human misgivings, such as having to eat or sleep, spending time to rest and have fun, etc. An Expert Advisor can be active on the market round the clock, constantly analyzing data and looking for an optimal moment to open a trade. Using such automated Expert Advisors always makes the traders life easier. Besides, being based on a tested and complicated trading strategy, an EA will keep you safe from many of the rookie mistakes that new traders tend to make. Software has no emotions, and only it’s strict and solid trading strategy to guide it.
What are the drawbacks?
Apart from the obvious advantages, Expert Advisors have several minor drawbacks, which you need to be aware of nevertheless.
1) Creating a profitable trading strategy, and programming it into a Forex robot can be quite a feat. This often makes the software expensive as it can only be created by experts.
2) The EA will only do that, which it is programmed to do.
3) An EA does not adapt – it will repeat the same mistake again and again, until it is either switched off, or changes in the code are made to fix the algorithm.