Forex Trading has always been a battle between profit and loss. Many believe that having sufficient information about market changes enables an individual to minimize loss and maximize profit. Unfortunately, like life, Forex Trading can be quite unpredictable.
Everyone doesn’t want their investments to be put into drain. It is all about profits for everyone. Some even want to trade 24/7 but are limited with their capacity as a human being. Humans tend to be greedy, especially when profits are on the rise and cower on the threat of facing losses.
This is why traders have been on a constant search for ways how to make their investments flourish. This where Expert Advisor takes place.
What Are Expert Advisors and How Does It Work?
Expert Advisor is a trading system that is automated which means that it can automatically open and close trades according to a pre-set rules. It can advise traders which trades to make and see which are not. The EA can also be automatically be programmed to automatically execute the trades on a live account.
The programming language used to develop the EA is MetaQuotes Language 4. The EA is an automated software so it can function 24/7.
Types of Expert Advisor
Commonly, there are four types of Expert Advisor that you may stumble upon. These EAs are:
News Expert Advisor
This takes into consideration several new and huge price increase that can take place during significant news releases.
Breakout Expert Advisor
Support and resistance levels are very vital in the trading market. They basically represent "supply and demand." This kind of EA opens trade when there is a significant price breakthrough preliminary determined on these levels.
Hedge Expert Advisor
This is used to reduce losses in forex trade. When you lost on an initial forex trade, then you will win on hedge trade. However, if you win on the initial trade, then the hedge trade will be deactivated and cancelled automatically.
Expert Advisor Scalper
Its goal is to pursue small profits when they are available.
The Downside of Expert Advisor
Expert Advisor has indeed been beneficial but unfortunately, it is lacking in some ways.
First, it is difficult to attest the accuracy of any Expert Advisor unless one tries it for himself.
Second, it does not work well on live accounts despite performing well on demo accounts, which results in traders losing their money.
Using Expert Advisors do not really guarantee bigger profits and lower losses.
Automated trading in the Forex Market needs proper risk and money management. The Expert Advisor only gives the opportunity to earn due to a large number of remunerative transactions.
However, it needs a lot of proper tuning up. No matter how advanced the logic that is built into the expert advisor nor how amazing the backtests results are, it cannot make up for its poor money management.
Money management rules the method of capital management to trade various assets. Its task is to meet an acceptable level of risk and use capital efficiently. It is the strategic management of position sizes to ensure a positive outcome. Losing trades can be easily reigned in and losing streaks can be accounted for if there is an excellent money management system.
Money Management Options
There are several options for money management that can be used when trading using the expert advisor.
Automatic Setting Lot
The lot size is set as a percentage of the Deposit. It means that the trader determines the possible loss he will receive if it was a safety Stop Loss order. Then, the trading robot will put the lot in the appropriate units.
The lot size that will be used in trading by the expert advisor will be indicated by the investor in the appropriate box. It is inconvenient because the settings need to be changed depending on the amount of funds in the account. The lot size should be calculated based on the size of the deposit.
The size of the first order in a series of orders
The algorithm which involves the opening of orders at a certain distance from each other set the size of the first transaction. The recommendations provided by the trading robot should be strictly followed.
Aside from having sound money management, one should also take into account that every expert advisor is going to experience a losing streak. Knowing this would help foresee and prepare when it happens. There is no knowing how long losing streak could last so it is essential to prepare to avoid the potential risk of wiping the account.
The risk of trading account size on any given trade should not exceed 2% in order for it to last for a long time. Profits and losses are always unpredictable. One may experience a very long losing streak and a very short winning streak; no one could tell. One could just have to make up for the losses it has.
Trading in a market as complex as Forex is like trading in the dark. No one could tell if you will earn a profit or completely lose on your account. There are various tips and strategies to refrain the loss from happening but still, it is a matter of proper preparation and decisions.