In trading (crypto, forex or others), an Expert Advisor (EA) is a program or a bot that informs and guides you when to make trades. Upon setting your trading strategy, you can set the program to initiate and execute trades for you by using your trading criteria by using algorithms. Once your set parameters are established, an EA will notify you or open a position on your behalf. From there, when your position is open, the EA can add close conditions such as trailing stops, limits or stops for your trade.
Expert advisors are most often used within the MetaTrader 5 trading platform and they are written in a programming language called MetaQuotes Language (MQL). There are two ways for you to use an EA. You can either select a current EA or design your own based on the trading criterias you prefer.
Here are 5 reasons why you should use an Expert Advisor to trade.
1. EAs help to remove the emotions when trading.
By using an EA to trade, you will not need to worry about your emotions getting the better of you.
If you use an EA, your FOMO feelings are under control. EAs do not fall prey to panic or anxiety and will always stick to the plan. It has no fear of loss or profit-making mentality; it only makes the trades for you because it is a bot. Therefore it is agreed that EAs can operate more sophisticated trading strategies compared to humans because EAs do not showcase any emotions.
Hence, with an EA trading on your behalf, you can reduce stress levels as it takes away the mental strain of trading. You can simply pre-set your trades and leave it to the EA to execute them for you.
2. You can expect speed from an EA.
The speed that an EA is able to act, spot or trade market opportunities on your behalf on different pairs be it crypto, Forex or any other instrument is faster than humans. EAs are often considered as a useful tool, used by traders to help make speedy informed trading decisions and faster order executions.
This strength makes EA a very appealing option for many traders to use when they trade.
3. EAs can trade 24/7, 365 days a year on your behalf.
When you appoint an EA to trade on your behalf, you can rest assured that the bot will work continuously on your behalf without any need for breaks. This means that you will never miss an opportunity as the bots are always monitoring the markets at all times on your behalf and there will be no missed opportunities.
4. Anyone can start trading with an EA.
Robots are much better at multitasking than us humans. EAs are widely available for traders to choose and as long as you select a reputable EA, you can easily set one up and running on your computer and start trading.
Please ensure that you do your research on the different types of reputable automated trading systems before committing to one. It is always advisable for you to start out on a demo account before jumping to the live market.
5. EAs make backtesting easier.
Being familiar with the overall metrics of your trading strategy is paramount. This includes various performance indicators such as average win to loss, number of trades, trade expectancy, profit and loss, average win percentage, number of consecutive trades and more. These are all important criterias that will help to consistently execute the trading strategy well.
To obtain these criterias, backtesting needs to be done. MetaTrader 5 offers a robust back testing engine that can perform a back test of your trade strategy quickly. However, if this is done manually, you are only limited to the amount of historical data that you have available for running the back test. Upon MetaTrader 5’s back testing, you can run various optimisation tests as well in an effort to enhance the performance of the EA.
There are some risks that traders need to be aware of when engaging Expert Advisors (EAs).
1. Lack of human interaction.
EAs are bots and no matter what you do, it can never come to par with the human’s mind.
Yes, having too much emotion while trading is not a wise move. However, not having any emotion at all during trading can bring out a new set of challenges. Therefore it is important to keep track of how an EA is performing on an on-going basis against your set trading criteria.
2. An Expert Advisor doesn’t do much in building your trading skills.
Practice makes perfect and traders who have traded for some time in the investment world have also built their financial speculation skills. This is a highly sought after skill through the many years of sitting in front of a computer screen watching and analysing price actions. Unfortunately, when you rely fully on an EA to trade the markets, you are unable to build up your own trading skills.
Most expert advisors may work for a certain period of time, and then as the market dynamics change, making the ‘expert bot’ advisor obsolete. As such, by relying too much on an expert advisor to trade on your behalf, you are setting yourself up for potential disappointment down the line. Hence it is important to keep a balanced approach between using an EA and educating yourself with trading knowledge.
3. EAs are not always online.
To ensure that MetaTrader 5 is always online, you need to install it. This means that you can only access it from the device you install it on and your EAs can only be accessed when your computer is connected with the MT5 program up and running. The only way to have your EA running throughout the session, is to have a VPS (virtual private server) installed.
4. EAs are unable to respond to real-time news.
Even though EAs are able to deal with more variables at once than a human can, it can only function when they are told to do so i.e. when they are programmed.
This means, EAs cannot respond to real-time news or press releases and will not have the ability to respond to things that fall outside the parameters set. This is different for a trader who is at the desk monitoring news. He has the mental capacity to make wiser decisions to avoid a trading mistake after a news release almost immediately.
Remember, there is no Holy Grail trading system in the markets. Continue to do your research, trade on a demo account before you make a decision when selecting an EA to help you perform your trades.
Once you’ve had enough practice, that is the time to convert to the live site and if you need help, our team is always here to help you.