Automated trading systems are becoming more common among Forex traders. Automated trading simply means the use of a programmed set of rules that helps in identifying the entry points and exit points of both types of trades. The program does all the job and the trader only chooses when the program will trade by switching it on and of although there also other programs which are more advanced and can choose for themselves when to trade and when not to trade.
The programs used in automated trading are known as trading experts or EAs. There simple EAs which are only responsible for identifying entry points or exit posits while there are other EAs which are very comprehensive and can do all the trading without the need of the trader.
Trading EAs can be programmed using the MQL4 or MQL5 programming languages. But if you are experienced using other programming languages like Python, you can also co ahead and program your own EA.
Also, if you are not good at programming or if you don’t have the time to do the programming, then you can always get the scripts or more comprehensive trading EAS online. Most trading EAs are paid for and you will have to cough some good cash at time.
When downloading trading EAs from the internet, you should be careful to avoid being scammed. You should always ensure that you test the Expert advisor in your demo account thoroughly before using to trade in your real trading account.
Trading EAs in most cases are programmed based on technical indicators.
Feature of a good Expert advisor
- Should be profitable
The profits that it makes in a day should outweigh the losses it makes.
- It should maintain less running trades
Although you may argue that trading EAs are ‘intelligent’, they also make mistakes and if it opens many trades and majority end up being mistakes, then your account becomes at risk of receiving a margin call in case the markets misbehave.
- It should not trade during news
A good trading EA should learn to identify when there are probable news releases by for example looking at the spreads and the sudden market movements.
However, there are trading EAs which are specifically programmed to trade news and if you get such, then you can trade the news.
- Should not place trades with a lot size which is too big for the account
The EA should have a way of calculating the margins and ensure that any trade entered does not compromise on the account
- It should show good performance when back testing
Before using a trading EA, even if you purchased it, it is always good to back test it. Most trading platforms especially the MT4 and MT5 have a place to back test EAs and indicators.
- It should also be profitable when traded on the demo account
When used on a demo account, the trading EA should be profitable. But you will have to use the exact conditions for the EA that you intend to use when trading in your real account.
Advantages of automated trading
- It helps minimize the trading emotions
In most cases when a human is trading it is natural for hi/her to get excited once he/she makes huge profits and also get disappointed when he/she makes huge losses. Most of the times the trades which follow after an excitement or disappointment end up being a total mess since they place the trade to either revenge in case of a disappointment or expecting to make more money in case of an excitement.
With trading Expert Advisors, the EA does not experience excitements or disappointments. Whether the EA makes a profit or a loss, the EA will go on trading as usual without remembering the last trade.
Automated trading helped the trade in following the rules of his trading strategy strictly no matter what.
- Reduces stress for the trader
When using automated trading system, the majority of the job is done by the EA and the trader does not trouble his brain much.
Forex trading can be very stressing especially when it comes to analyzing the markets and more after making consistent losses. But with the trading EAs, the EA does the analysis, then comes up with a trading signal, places the trade and also monitors the trade all through till a chance for closing the trade resents itself and it closes the trade.
- Helps in maintaining consistency in trading
When using the EAs, the trader can be guaranteed of maintain a consistent good record. The conditions of placing trades and closing trades does not change with the EAs. The program never mutates and it remains the same unless changed by the trader.
This is especially important in growing an account. You will require consistent profits for your account to grow. It is not making loses today and tomorrow making profits then you makes losses for the coming three days. No!