Expert Advisor Trading FAQ

There are many people new to the Forex market and much more new to the world of automated trading. For this reason, I have put together this general frequently asked questions section. To help anyone who needs to gain a deeper understanding of this subject.

What is a Forex Expert Advisor?

An Expert Advisor is basically a program written in the MetaQuotes language that trades automatically using the MetaTrader platform.

What is an Expert Advisor’s objective?

The aim of an EA (Expert Advisor) is to take trading decisions away from the human trader. Alternatively, Expert Advisors can be used just to do money management, loss control or other similar jobs which can be automatized in Forex trading.

What are an Expert’s advantages and disadvantages over manual trading?

An Expert Advisor has the benefit of being emotionless. Expert Advisors feel no fear or greed and operate purely based on mathematical logic. They also have the advantage of letting a person trade without the stress of being constantly on top of the market. A person does not have to worry about monitoring indicators and charts many times a day. An Expert Advisor can also monitor a wide range of indicators given its computational basis. Something which would be extremely hard for a person.

An Expert Advisor has many disadvantages, though. The main problem is that an Expert Advisor has a limited logic. It only has a certain amount of rules incorporated into it, making it vulnerable to market changes, while humans can adapt relatively quickly. They are also limited by the amount of data they can access. An EA has no knowledge of fundamentals or news. This makes his vision of the market somehow limited as it cannot anticipate moves based on economic factors.

Is trading with a Forex Expert Advisor profitable?

This one is probably the biggest frequently asked question. Well, to be completely honest, the technology is rather new. They are not any commercial Expert Advisors (to the best of my knowledge) that have a track record which is long enough to support long term profit making. And even though we may be lacking direct evidence I am inclined to suggest that Expert Advisor trading can be profitable, probably to a lesser extent than a professional Forex trader. I firmly believe, though, that the perfect setup for Expert Advisors is in combination with other Experts in a well-made portfolio (like the ones being tested on this website).

What characteristics should I look for in a successful EA?

Successful Expert Advisors are a very hard thing to find. This is mainly because the market is plagued with people that sell Expert Advisors that simply do not work. For me, inferring from my experience, a profitable EA has at least the following characteristics.

  • It has excellent money management which obviously includes a stop loss
  • It has given positive results at least in 2 months of forward testing
  • Does not produce more than 5-10% monthly profit
  • It has positive reviews from unbiased people (this means non-affiliate, non-friends with creator, etc.)

These are characteristics which I consider necessary but not sufficient. An Expert Advisor must have the above to be successful, but a losing EA can have them and still be a bad EA. This at least discards the experts that lack them.

I am new to the Forex market. Is this a way for me to trade?

Please be very very careful. Although Expert Advisor trading is promoted as a way for the Forex newbie to make money, I strongly recommend caution. Expert Advisor trading is a very competitive market with many people out there waiting to get the Forex newbie’s money with the promises of financial success. Sure, a newbie can be successful with the right Expert and the right market conditions, but again, you need the knowledge and understanding of the Forex market to be successful. To understand which experts to buy and to understand when they are unprofitable and should not be trading. I advise you read a lot of reviews and investigate experts you want to buy very deeply.

Are free Expert Advisors a waste of time?

Many people think that if an EA is not commercial, it is doomed only by the market getting efficient to the experts modus operandi. This is a plausible very hard to test hypothesis because it would require a profitable Expert Advisor which becomes unprofitable by simple virtue of it being used. This is very unlikely. Most likely, free experts become unprofitable because of rigidity. Their logic is too stiff to adapt to ever changing market conditions. My solution would be to use many, and their rigid logics would become plastic with combination. This is the idea behind combining them in a portfolio.

I think this covers many of the general questions people have about Expert Advisor trading. This will be completed shortly with another section which will treat logistic questions (such as broker, installation, etc).

I began trading in 2005, but it wasn’t until early 2008 that I got my act together to become profitable. Forex trading is what I do for a living. And writing about it is something I enjoy almost as much. It’s an amazing “job” that never remains static, and never gets boring.

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