What are Expert Advisors (EAs)
Today we are going to talk about a different way of trading – automated trading with the use of Expert Advisors. Expert Advisors (EAs) are software programs designed specifically for following a set of rules. It is called automated trading because once you set up the EA, it does the job by itself and no interference is needed from your part.
Each EA is built to follow a specific strategy, with a strict set of rules and because it is a program, it will always respect those rules. So the human emotion is totally eliminated. No fear in placing the next trade, no greed when it comes to taking profits and no hesitation.
Advantages And Disadvantages Of Using Automated Trading
It sounds too good to be true, isn’t it? Well, EAs have some disadvantages. First of all, an EA can’t be programmed for any strategy. Some strategies require the trader to use discretion and a program cannot do that and also it cannot judge what impact economic news will have on the markets
There is also the execution problem – you cannot be always 100% sure that your EA will open a trade when it’s supposed to and more important, if it’s going to close it. Being a computer program, an EA can fail like any other software. Are you familiar with the phrase ”This program has encountered a problem and needs to close”? I’m sure you are. Well, that’s why I wouldn’t trust a software program with my money. If my music player “encounters a problem and needs to close”, it’s not a problem for me, but if the EA that I’m using fails to close my trade at a 50 pip loss and price continues to go against me for another hundred pips, that’s a big problem.
In other words, use the greatest computer you have at your disposal – your brain and don’t let the music player do the trading for you. Some of you might argue and say that an EA is good for trading at night, when you sleep. But why would I want to trade at night? Out of greed, which is one of a trader’s greatest enemies? Or because my strategy isn’t making enough money during the day, which means that I have no reason to want to trade that strategy during the night as well.
If you feel like using EAs, please test them thoroughly before trusting them with your money.