Expert Advisors Explained

An Expert Advisor sounds like something that can make you a boatload of money in the world of currency trading. An expert that advises me how and when to execute trades for profit? What could possibly go wrong? The answer is plenty if you don’t know what you’re doing.

Curency Movements Image

An Explanation of Expert Advisors

Firstly, an Expert Advisor is NOT a personal trading guru that shares insider tips and tricks with you. In fact, an Expert Advisor as related to the world of trading is not even a human being. It is a specially programmed piece of software that allows users to automate a trading process at high frequency or volume. Expert Advisors are designed for use on the MetaTrader trading platform exclusively and use MetaTrader proprietary coding language called Meta Quotes Version 4. Other forms of Expert Advisors or algorithmic, automated trading robots do exist too and traders have been known to deploy trade robots in a range of markets including in equity markets. Some expert advisor tool can be customised using a programming language if you have the programming know-how.

Expert High Frequency Trading Advisors

How Do Expert Advisors Work?

The beauty of using mainstream Forex trading software or trading systems such as MetaTrader 4 or 5 is that the software is open-source and information and instructions are widely available online. Expert Advisors once set up properly, can gather a range of inputs such as historical price movement, trading strategies and market data from a range of sources including mainstream financial news outlets and social media. With this information feeding the algorithm, buy and sell orders are automatically executed in line with market performance helping traders to maximise potential gains without the need to be across every critical news source. Investment banks, to amplify profits from their derivatives trading, use algorithmic trading widely and with thanks to Meta Quotes retail traders can now take advantage of the same opportunities.

Expert Advisors And How They Work

How Can I Create An Expert Advisor?

There are plenty of resources online that explain exactly how to create expert advisors for trading on the forex market. These guides are incredibly easy to understand, due mainly to the fact that MetaTrader is an open-source program with people all over the globe invited to contribute and develop their own automated trading programs. Within MetaTrader, MetaEditor needs to be opened via the Navigator window or within the main menu. Setting up an Expert Advisor requires a little bit of coding knowledge. However, traders can learn all about this by reading the MT4 Help Guide and browsing MetaQuotes chat forums.

MQL 4 Expert Advisor Programmer Language

Why Are Algorithmic Traders Condemned?

Much has been written about high-frequency traders in recent times with many news outlets and financial experts openly condemning them as they drown out local, retail traders who simply cannot compete. These expensive, hugely powerful trading machines are designed to jump ahead of the queue to buy or sell derivatives before others can. Often trading robots are situated really close to local exchanges and connected to a high speed internet connection giving the owner or these ‘bots’ a split-second edge on the masses. Usually, only “deep-pocketed investors” have the money to afford these high-frequency traders creating an unfair playing field amongst individual traders.

Market Destabilisation EAs

Risks Associated With An Expert Advisor

Like anything without human intervention, sometimes computer glitches can take place. As EAs usually trade at high volume and are automated, if you fail to notice an issue with your strategy or program your losses can be significantly greater than those sustained if you trade manually. These risks are well documented and even high-end bots that are deployed by the large institutions have a greater risk of a computer failure that could result in systemic market volatility or interruption. There have been countless stories surrounding erroneous orders and staggering losses as a result of these types of automated software.

Risks With Expert Advisor

Practice Makes Perfect

It is only natural that at some point, once you feel you have the requisite experience you explore high frequency trading and look to obtain and expert advisor. As mentioned above MetaTrader make it easy to set up trading robots. Before you deploy your algorithm make sure to test it effectively. Many Forex companies offer unlimited demo accounts where not only can you learn the Forex ropes initially, you can also test your strategies both manual and automated. This is the perfect environment for ensuring your EA is working effectively and is being powered by only accurate information. Remember, in Forex losses can ensue very easily and can be enhanced even more with the use of a poorly put together algorithmic trader. When you think you’re ready to start trading seriously using your EA spend a little more time practising to really hone your craft.