Using an expert advisor allows to fully automate trading and eliminate such human failings as emotions, fatigue, or bias when analyzing the situation. The only problem today is to choose a suitable EA from a variety of existing advisors.
All Forex advisors can be divided into the following types:
- Hedging advisors: they open 2 positions in the opposite directions, and once the market situation has cleared up, the losing deal closes, while the profitable one is increased by pullbacks.
- News advisors: they are subspecies to hedging and are efficient before the release of important news. In that moment, the price often "freezes" in a narrow corridor, but after the release of the news it makes a leap in mere seconds.
- Advisors using a set of indicators to analyze the market situation.
- Scalping advisers. Indicators are also used, but trading is conducted at small time intervals (usually in the m1 – m15 range).
The advisors also can be divided into fully automated (participation of the trader is not required) and semi-automated – in the latter case, the final decision is taken by a human. All scalping advisers without exceptions that are notable for the huge amount of deals have a mode of automated trading.
How to choose a stable Forex EA
A truly stable Forex EA must have a good survival rate. To check this, you need to test and optimize it for a long period of time. This will show how the EA behaves in trending areas and during a flat market.
You will have to make a choice between stable but relatively low earnings (5-15 % per month) and advisors with increased risks but higher profits. Possible limitations on the part of DCs should also be taken into consideration. Some companies do not approve of using scalping advisors that make several hundred deals a day, and the trader’s account can be blocked in such a case.
Another significant limitation when choosing in favor of automated trading is difficulties with the use of technical analysis. When writing an EA, programmers encounter difficulties in the mathematical description of some graphic constructions. This is the very moment when a human can have advantages over a trading robot.
Can stable Forex EA become a source of income?
Stable Forex EA can become the basis of profitable trading only if its work is constantly monitored. Quite common misconception, especially among beginners, is that the EA will do everything for them, and the trader will only have to withdraw profits.
But in fact, any EA, even with a high survival rate, requires constant optimization. That is one of the major drawbacks of automated trading – no EA is able to evolve on its own. Another condition for profitable automated trading is a thorough knowledge of the EA algorithm. Only in this case you can be sure of the final result.
Today, many advisors are publicly available, some of them are sold – sometimes, for a lot of money. But you must understand that it is in the best case an algorithm which performed effectively in the past, and its use will require additional testing and customization. The market can change at any time and EA that until recently was profitable may become unprofitable.
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It can be argued that a stable Forex EA is quite real, but it can’t be considered as a universal tool for trading without participation of the trader. Human intervention will be required in any case.