Are you thinking about trading with Expert Advisor (EA) and do you want to know how it works and what is necessary to trade with EA? Read this article to get closer info about automated trading.
In trading community the name Expert Advisor is used for automated trading robots. The idea is simple – you are not opening and closing the trades but the robot does everything for you. It doesn’t sleep, it doesn’t have feelings, emotions and it executes trades with certain conditions withing milliseconds – it is very fast and precise.
How Expert Advisor works?
Expert advisor has programmed a set of rules under which it opens and closes trades based on certain conditions. For its proper function it has to run on some PC (or server) that is online 24/7. The robot is alive all the time. It is scanning the market and waiting for the certain rule to be applied and opens or closes the trades automatically. This is one of the biggest advantages – it is trading non-stop and you don’t have to spend your time sitting in front of the computer and waiting for the proper signal to manually open or close the trades. You can spend your time with other activities and let the EA trade for you.
What do you need to trade with EA?
At first you need an Expert Advisor. But this is not the last thing that is necessary to successfully trade with EA.
Because the robot has to operate 24/7 you should have reliable internet connection and PC with trading terminal. Most of the people can not offer PC that is going to be online 24/7 with reliable and fast internet connection and this is the reason why you should consider using VPS server. You will have to pay for VPS some amount of money but if you want to succeed with an EA it is worth the money. Also, the VPS server has usually much lower latency to the market.
Try to imagine that you are trading with EA on your home PC but you have power outage in the middle of the active trade operation. Suddenly the market turns against you. You can loose a lot of money just because the PC was down at the time (normally the EA should close the trade but it couldn’t because the PC hosting the EA had outage).
Most of the beginners start trading with MM or STP brokers especially because these broker offer lower trading fees. If you are considering automated trading you need a true ECN broker. The reason why you should have ECN broker is explained in other article.
The last thing and the most important one: DO NOT interact with the EA. When the EA triggers an order just keep your nerves and don’t modify the trade. Let the EA do the work for you.
Advantages of trading with EA
EA never sleeps, never rests, never hesitates and operates 24/7. It can save your time and you can spend it with other activities. It does not have any feelings and trades are based on strictly programmed set of conditions. If using VPS server and ECN account it can trade within milliseconds – it is way faster than any human can be. As a manual trader first you have to see the indication, then decide if you open the trade and then you possibly open the trade. But few seconds have already passed since you started thinking. The EA is already decided and the order is placed in the market before you even blink an eye.
Disadvantages of trading with EA
More like disadvantages lets call it low lights because these are common for manual traders as well. First low light is that EA is optimized based on market history which means that nobody can predict if the EA will work in the future (but neither nobody can say if your manual strategy will work in the future right?).
Robots doesn’t have any feelings and sense for opening (or closing) the trades even if it doesn’t match exactly the trading strategy. To explain this better: Lets say you want to open a buy trade when the price crosses moving average. But you, as a human with some deeper experience, can have better overview about the market conditions and sometimes you know that this trade is not ideal, so you can postpone the trade. Robot will just open the trade without hesitations because the condition for opening the trade was met.
As market evolves also expert advisors need some settings adjustments and optimizations from time to time to achieve the best performance.
Summary
If you are experienced trader you probably don’t think about using the robots. Robots might be a good choice if you are less experienced trader and not so successful in manual trading. The reason why most of the traders are not successful is psychology – you simply take too much care about your money. Remember if you are trading (not investing but trading) you should go to the market with that amount of money that you are willing to loose and you won’t end up on the street. At that point you will become much more successful because your mind will be free and will prevent you from bad decisions deviated from your trading strategy. Also automated robots can save you a lot of time sitting in front of the computer and waiting for your next trade.