Expert Advisor

An Expert Advisor (EA) is a software designed to run on the Metatrader trading platform. Under the rules specified via its parameters, an EA can execute trades autonomously on the forex market.

As such an EA or trading robot, once set up, can enter, modify and exit trades, following the instructions set out by its developer, without any user intervention.

The main benefit in developing and running an Expert Advisor is of course, freeing up time for the trader, especially if:

a) you have a system which needs a lot of screen time studying charts

b) your strategy is purely mechanical, i.e. possessing a clear set of rules, allowing it to be programmed into an automated algorithm

In theory, a trader no longer needs to be present at the terminal, as the EA takes complete control.

Naturally, this solves the problem of the trader missing useful trading opportunities during sleep, for example.

Advantages and Disadvantages of Expert Advisors

Arguably the most popular retail trading platform today is Metatrader, (developed by Metaquotes) which became the leading platform partly due to its support of EAs, resulting in a market now inundated by a barrage of EAs.

Yet, while the advantages of EAs are clear, there are inevitably a host of disadvantages – the first of which is related to the market itself.

Due to constantly changing market conditions, an EA consequently needs ongoing refining and optimizing.

This is the number one reason why historical results of an EA so often differ from its live trading.

Secondly, if a system relies upon discretionary entries or exits, which are notoriously arduous to implement into a fixed algorithm, an EA would be of little use.

Note that since EAs can only be run on an active instance of the terminal, this essentially means any loss of power, or internet connectivity issues, would immediately cause the EA to cease functioning; potentially dangerous if your position runs into losses.

However, such occurrences can be almost eliminated through the use of virtual private servers.