In recent years, the Forex market has been experiencing continuous expansion. This has attracted numerous investors and traders, making the Forex market more dynamic than ever.
Moreover, traders have been introducing a wide variety of trading methods and strategies. They are always eager to achieve optimal profit targets, regardless of the harsh market conditions.
Although the concept of trading with Expert Advisors (also known as Forex EAs) may be relatively new to beginners, it is considered one of the trading strategies not to be overlooked in 2023.
Let’s explore what Forex EAs are and whether they represent a new trading era in 2023.
Understanding Forex EAs
Trading in the foreign exchange (Forex) market has never been a smooth journey and often involves considerable pressure. Traders often make erroneous decisions, negatively impacting their trades.
An effective solution to overcome this issue is to utilize Expert Advisors (or Forex EAs). Let’s delve deeper into Forex EAs with FXCE.
What is a Forex EA?
As mentioned in the previous article, a Forex EA is an automated Forex trading system. In MetaTrader, they are programmed using the MetaQuotes Language 4 and MetaQuotes Language 5 and developed for use on the MT4 and MT5 platforms.
Forex EAs are programmed to automatically generate trading signals and send notifications to traders regarding trading opportunities. A Forex EA strictly adheres to predefined rules and does not involve any human intervention.
The Operation of Forex EAs
Forex EAs function based on pre-established parameters. The system continuously scans for opportunities to carry out trades automatically. Once positive signals are identified in the market or significant opportunities arise, the Forex EA seizes those chances and generates profits for the account holder.
Forex EAs can be programmed to operate in various ways.
For instance, they can utilize technical indicators such as Moving Averages (MA) or the Moving Average Convergence Divergence (MACD) indicator. Additionally, they can employ indicators that identify trends and breakouts when necessary.
Some Forex EAs are designed to have full control over your trading account. These EAs assess the current account balance before deciding whether to execute trades or not. The general principle is to accept a risk of 1-2% of the Trader’s account balance.
How is an Automatic Forex EA different from a Manual Forex EA?
Similar to automated trading systems, an Automatic Forex EA is a program that identifies patterns in the market and generates trading signals. However, unlike a Manual Forex EA, an Automatic Forex EA can execute trades on behalf of the trader.
- An Automatic EA executes orders as soon as the trading conditions and rules are met, without notifying the trader.
- A Manual EA’s role is to detect signals, calculate parameters (entry points, stop-loss, take-profit, etc.) for trades based on the set strategy, and report them to the trader, who then decides whether to follow through with the trades.
Automatic and Manual Forex EAs share many similarities as they are both types of automated trading software. The main distinction between an Automatic Forex EA and a Manual EA is that the Automatic EA generates “trading signals,” whereas the Automatic EA executes trades without requiring any manual authorization.
However, the terms are often used interchangeably, meaning that many Forex EAs are capable of performing more than just generating initial trading signals. Like any automated software, both types reduce the chances of making emotional and irrational trading decisions. This is a common issue for inexperienced traders.
Who is EA Forex trading suitable for?
EA Forex trading is suitable for a wide range of individuals, from amateur traders to professionals. As a result, EA Forex offers diverse designs and trading strategies tailored to each individual or organization:
- Expert Advisor News – It leverages various news events and significant price movements that can occur during important news releases.
- Expert Advisor Breakout – This strategy is specifically designed to open trades when prices surpass predefined resistance and support levels.
- Expert Advisor Hedge – It minimizes losses in one position while increasing profits in another.
- Expert Advisor Scalper – The objective of this trading bot (EA) is to secure small profits. It opens and closes trades that generate profits and can execute trades up to 400-500 times a day, depending on market conditions.
And there are even more diverse strategies available!
EA Forex is automated trading software suitable for traders of all types, ranging from retail traders to small-scale institutional investors such as investment funds. The only difference lies in the level of experience in using EAs and the approach to different strategies.
Benefits of EA Forex Features
Almost all EAs automate every aspect of Forex trading and generate profits. Each EA Forex has the ability to calculate multiple factors to help traders make faster and more accurate decisions.
These factors include price influences and automated trading rules that eliminate emotions. This combination proves to be very useful and leads to consistent success.
Expert Advisors allow traders to search for signals, monitor and track orders automatically, quickly, and efficiently. Traders do not need to spend excessive time monitoring the real-time market.
Some key features of Expert Advisors include:
- Automated trade execution: Traders/investors simply need to monitor the pre-configured EA Forex. Trades are executed automatically without any manual intervention.
- Management of open positions: EA Forex monitors trade positions, including trading volume, currency pairs, and trading timeframes.
- Automatic trade exits: Some EA Forex systems automatically exit positions (close trades) when the market is about to enter a phase of major news releases.
- Implementation of Dollar Cost Averaging (DCA) or Martingale: Automatic DCA and Martingale are among the strategies that boost profits through EAs without the need for manual intervention.
- Trade copying: EAs are widely used on social trading platforms, allowing for the replication of trades.
- 24/7 automated trading: EAs enable automated trade execution in markets that require continuous operation.
Advantages and Disadvantages of Forex EA
There is a lot of debate among experts regarding the use of EAs in trading. Let’s explore the advantages and disadvantages of using EAs in the Forex market.
- 24/7 Operation: Expert Advisors operate continuously, automatically monitoring and capturing trading opportunities as soon as signals appear on any trading pair.
- Overcoming Emotional Barriers: EAs help traders overcome psychological barriers in trading. Pre-established investment strategies are maintained and accompany traders throughout their journey.
- Time-saving: Traders are not required to constantly monitor charts, trading products, and price patterns.
- Better Capital Management: This is the greatest strength as traders no longer need to closely monitor continuous account drawdowns. Consistent application of capital management parameters helps increase the win rate and minimize the risk of account depletion.
- On the other hand, there are some drawbacks to using Forex EAs:
- Difficulty in Verifying Accuracy: It can be challenging to verify the accuracy of an EA unless you are the one using it. There are several possible scenarios that can occur when using a Forex EA:
- VPS Malfunction: A malfunctioning Virtual Private Server (VPS) can result in unexpected losses.
- Inadequate Backtest Results: Applying an EA to a demo account may not yield the desired backtest results, leading to errors when applied to a live account.
- Excessive Customization of MT4 or MT5 Expert Advisor: Making too many modifications to an Expert Advisor can prevent stable profit display on a demo account.
- Lack of Creative Thinking in Robot EAs: EAs lack the ability to imagine future possibilities as they are limited by their programmed rules. Furthermore, only humans can deeply and intuitively follow, study, and update the most accurate news. Therefore, EA functionality can also be affected by inaccurate information.
Considerations when Using Forex EAs on a Platform:
While traders can use multiple Forex EAs on the MetaTrader Client Terminal, it is important to note that not all Expert Advisors can “cooperate” on a single terminal. This is because Expert Advisors may try to manage each other’s open trades. Programmers often resolve this issue by applying specific source codes.
However, there are still limitations within the platform. For example, an Expert Advisor in MetaTrader can only work with one trading server at a time. Having multiple EAs displaying numerous activities on the same terminal and communicating with the server can cause a ‘trade context busy’ error in the trade log. This occurs when there are too many EAs on a Client Terminal.
Things to Consider when Trading with Forex EAs:
- When searching for an EA that suits your needs, there are several points to consider before deciding to use Forex EAs as a substitute for manual trading.
- They are not always experts: If you come across a product claiming to be better than a trader or promising millions of pounds in profit, it is likely too good to be true. Always approach finding an EA with the same caution as any other investment.
- Simpler is better: Look for objective reviews and compare how an EA performs against others. Additionally, seek advice from successful or renowned traders in the real market. Some EAs are known to be scams, and investing in them can result in significant financial losses. Therefore, conducting thorough due diligence is crucial before making any investments.
- They are not human: While this software reduces emotional factors, less interaction with humans can mean that the software may not react quickly to changing situations and lacks flexibility. This issue can sometimes be addressed by modifying the software’s code and parameters. However, during the waiting period, it can lead to unsuccessful trades.
- Is your EA always connected? Unfortunately, an EA can only run on the device it was initially linked to. This means that unless that device remains consistently powered on and connected not only to the internet but also to the trading platform, the monitoring and trading signals will be unreliable.
- Power outages and Wi-Fi disruptions can interrupt the service: To improve connectivity, you can download a Virtual Private Server (VPS) that allows you to have an online version of the EA. The data is stored on an external server, allowing this version to run continuously.
Things to Know Before Setting Up a Forex EA
If you are considering setting up and using a Forex EA, the following information will provide you with some valuable tips. You can employ the Expert Advisor Builder, which allows traders to input parameters for selected trades and generate Forex EA programs, or the FXCE Giga platform, an EA programming platform developed by the FXCE team.
- Validate the Importance of Data
First and foremost, exercise caution regarding the reliability of backtest results. Just because a backtest yields favorable results does not necessarily mean that the system has the potential to generate substantial profits. While you can conduct backtests using a demo account, it does not guarantee optimal performance on a live account. Proceed with caution!
The results produced by an EA depend on the quality of the backtest data. Inaccurate data can lead to unreliable outcomes. The default data in MT4 and MT5 only achieves a modeling quality of up to 90%. Even though the data may show promising signals, significant discrepancies between backtest results and real-time experiences can occur, particularly on smaller time frames.
One advantage is that historical data sources allow free access and provide guidance on preparing the necessary data for MetaTrader.
- Understand Trader Execution Speed
Reliable data is the first step in fine-tuning your Forex EA for trading on a real account. The next step involves improving the execution speed.
MT4 and MT5 operate within a trading session duration of 30 seconds. If you are using a Forex EA, your session will automatically time out if there is no trading activity within that specified time frame. This requires automatic reauthentication of the IP address through a password and login information.
This process may take a few seconds, possibly up to two to three seconds, depending on the broker. While this is a negligible time frame, during periods of high volatility, delays can significantly impact your trading outcomes.
Debugging code on the MetaTrader Trade Bot can be extremely challenging. Since MetaQuotes’ policies prioritize meeting the needs of brokers over traders, you will find that the debugging tool is not included in the available toolset.
However, there are still some methods to assist traders. For example, manually printing orders directly into the code, although it can be difficult to manage, especially with thousands of lines of code and an unknown issue location. You can download Microsoft DebugView to review the formatted history for potential solutions.
- Check MetaTrader and Forex EA Connection
Ensure that you check the MetaTrader connection. The trader’s platform needs to be running and directly connected to the broker for the Expert Advisor to start executing trades. While MT4 and MT5 are designed to automatically reconnect to the server without any issues, it does not always work as expected.
If you have multiple MetaTrader accounts, incorrect login information can sometimes occur during the reconnection process. The best solution is to remove any unused accounts from the Navigator window in MT4/MT5. Although this is a minor issue, it can be troublesome if you experience disconnections and the EA does not run consistently.
Forex EA – Embracing the Era of Automated Trading in 2023
With the valuable information above, it is expected that Forex EAs will usher in a new era for Forex traders in the future. Let us explore the upcoming opportunities with Forex EAs and embrace the year 2023 together!