How Do MetaTrader Expert Advisors Work?
There are a vast range MT4 and MT5 Expert Advisors available on the internet. Some of them have been developed especially for trading news events and to remain out of the market at all other times, while other EAs are meant to stay active 24/7. Experienced Forex traders who have developed their own manual trading FX systems often hire MQL4 programmers to automate their systems, thereby creating their own custom EA.
All Expert Advisors have an identical purpose, and that is to fully automate the Forex trading process and produce a profit while doing it. Expert Advisors utilise technical indicators to gauge conditions on the market, and then make trading decisions. Prior to using an Expert Advisor, it must first be attached to a chart on the MT4 platform.
An Expert Advisor can take into account dozens of factors and elements in order to decide what the next actions will be. This capacity to consider such a wide range of price affecting elements, as well as the discipline of an emotionless automated trading system, can often lead to quite a useful and successful combination.
Which Functions Does a Forex Expert Advisor Have?
The best Forex Expert Advisors can be programmed to work in multiple ways (e.g. by utilising a selection of technical indicators , such as the moving average indicator, or the MACD indicator) or by searching for necessary trends and breakouts.
By applying those diverse indicators, the EA can analyse the market, as well as the behaviour of individual financial instruments, and can generate a signal about trading opportunities.
EAs are similar to Forex robots, which are another type of automated trading software. When using strict definitions, the difference between an EA and a Forex robot is that an EA will generate signals while a robot will perform trades without any manual sign-off required. However, the terms are often used interchangeably, which means that many so-called Forex EAs are capable of far more than just generating signals.
Some Expert Advisors are designed to take full control of your account. The idea here is that it will look at your current account balance, before deciding how much of your balance can be put at risk. The general rule of thumb is to only to risk 1 – 2% of your account balance.
Furthermore, it may review the trades and decide whether there should be a trailing stop take-profit or a stop-loss. As soon as Forex Expert Advisors have the necessary information, they also take into account the current market conditions. Consequently, you will be notified when to open a particular position.
What Are The Disadvantages of Using A MetaTrader 4 EA?
We talked about optimization in the first few paragraphs. There is a high risk that the MT4 EA settings have been optimized to bring about the best results when backtesting the expert advisor’s automated trading strategy. We refer to this as ‘curve-fitting’ and it’s one of the biggest pitfalls when backtesting a Forex robot.
Forex trading with an automated algorithm can often be expensive. But you can certainly purchase one for as little as $100 and use it to your advantage.
The question of how much you should pay is very subjective. However, it is good to know that in order to forward test the MT4 EA, it would require testing in live FX markets with real money. How much you want to throw in is at your own discretion.
How to get started with Expert Advisors
You can build your own EA or download one that someone else has already built. Whichever way you choose to begin using an EA, it will need to be backtested to ensure that it works in the way you expect before letting it trade with real funds.
How to Find Best MT4 Expert Advisors (EAs) for Forex Trading?
The expert advisors are one of the types of automated trading in the Forex. They appear on the MetaTrader 4 platforms. They essentially have two functions: giving traders the latest trading signals and also executing trades on their own, in accordance with the set of entry, exit, and money management rules, defined by the trader.
Here it is worth noting that traders can simply limit EAs to just giving advice and pointing out the trading signals. Or alternatively, they can authorize them to buy and sell currency pairs on the trader’s behalf.
There is no one universally accepted best MT4 EA. Instead, there are dozens of different expert advisors on the platform, each based on different Forex indicators. The market participants can use some of those for Free, while others are available only by purchase.
In order to analyze the effectiveness of each expert advisor, traders can use the backtesting tool. This allows market participants to measure how each EA would have performed during the specified timeframe with a given currency pair.
Furthermore, the MetaTrader 4 allows traders to check the average rating of each expert adviser, given to them by the trading community. So this can be another factor traders can keep in mind when choosing which EA to use in their daily trading.
Do I Really Need An Automated MT4 Expert Advisor?
Now that you have an understanding of the pros and cons of using an automated Forex trading strategy, the question is basically one of personal choice.
If you are short on time and can’t dedicate resources to learn Forex, investing in an automated trading Forex system could be the most ideal choice.
If you lack confidence in managing risk or you tend to make the opposite decision of what your Forex strategy tells you to, an expert advisor should help as well.
Don’t forget, expert advisors are not only helping with rule automation but also with your entry and exit policies. And more often than not, those are the main variables that lead to losses!
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