Understanding more about Expert Advisors (EA)
What is an Expert Advisor on Forex?
On Forex, there are plenty of trading systems: profitable or not very. The trading community keeps bringing to perfection and inventing new and new up-to-date systems. Naturally, the trader has little time to keep track of the multiple trading opportunities all over the market on all instruments.There emerges a need for an Expert Advisor (EA) - an automatic system.
The traders, who have profitable trading systems, have designed analytical programs. The simplest of them are called scripts. A script is a simple single algorithm that gives a signal to the trader or makes a trade itself if certain conditions are fulfilled. As a rule, these programs switch off when a trade is complete, so for the next use they are to be launched again.
Imagine we have a strategy for one instrument. The condition is for the market to move from the level of point A to the level of point B.
According to our strategy, after each impulse of growth, in correction, we can enter the market with a profit, at the level of point B. Imagine we have decided to enter the market with a correction of 50%.
To free ourselves from tiresome waiting for the development of impulses of growth and corrections, we can use the script after each trend. The script will activate our order when the trading situation happens. At the example of pic. 1, the script activates the first order at the correction of the first impulse of growth. Upon doing so, it switches off, so you will have to launch it again after the second impulse. The script will activate your second order at the moment of correction to the level 50% from the second impulse. In both cases, the Take Profit is at point B. This is the simplest example of using a script.
The advantage of such a script is the trustworthiness of its signals on H4.
The drawback is the necessity to re-launch it each time for a correct trade.
👉 Here you can find information about how to create your own Expert Advisor from scratch with no coding skills.
Pros and cons of Expert Advisors
If your strategy lets you count the correction on each trend of an impulse precisely, you need a more complicated program, accounting for both buys at the moments of the development of the impulse and sells at the moments of its correction.
Such complicated programs are called Expert Advisors. They can detect the size of an impulse, as well as the size of a correction. They independently open both selling and buying orders. Practically, after the Expert Advisor is launched, it executes your trading strategy fully and by itself.
This is one of the clear pros of such Expert Advisors.
Among their cons is the inability to adapt to new market situations requiring completely new trading strategies. Many traders try to optimize Expert Advisors but in the end they get disappointing results, deteriorating trust even to the most promising, brand-new trading strategies.
Types of Expert Advisors
All existing EAs can be divided in 8 types.
1. Scalping EA
This Expert Advisorcan open hundreds of trades in a session. Each order has a short Take Profit and a short Stop Loss. At the end of the day, a positive balance of profit is probable.
2. Range EA
This Expert Advisorstarts working when the market is in a consolidation range. The program trades from the borders of the range.
3. Trend EA
This Expert Advisordetects the beginning of a trend and works till this trend ends and a new one begins.
This Expert Advisoraims at breaking out a range. In the case of a Stop Loss, it reverses the order and doubles it (again and again) until it makes a profit sized the width of the range.
5. Multicurrency EA
These are the most expensive Expert Advisors. They can analyze a lot of instruments and trade almost all currency pairs, taking correlation into account.
6. News EA
This Expert Advisortrades at specific time. Before some news is published, it analyzes the consolidation area formed and uses a breakout of the range in a certain direction till the end of the session.
7. EA on indicators
This Expert Advisorreceives signals from at least two indicators, the first one being a trend indicator and the second one - an oscillator.
8. EA without indicators
This Expert Advisor trades a certain graphic or technical algorithm in strict compliance with the rules of an indicatorless strategy.
👉 Here you can find descriptions and test drives of the most popular Expert Advisors on Forex.
Is it worth working with an Expert Advisor?
Remember: every automatic Expert Advisor/robot executes just one strategy. It should be launched only when and if you see a clear trading situation suitable for your time-proven strategy, written in the Expert Advisor. Any attempts of optimizing and then using ready-made robots that do not suit your strategy may entail financial losses.
Successful trading to everyone!
This article was submitted by Dmitriy Gurkovskiy, Financial Expert and Author at RoboForex Blog
