Most people have heard that there are two trading methods in FX which are discretionary trading and automatic trading.
There are many methods for automatic trading, and one of them is to trade using the MT4 dedicated automatic trading program called EA (Expert Adviser).
Many types of EA are sold in the world, and those who can program can also make their own.
In this article, we will thoroughly explain the advantages and disadvantages of using EA, and how to obtain EA and how to use it.
What is EAs (Expert Advisers)?
EA is an abbreviation for Expert Advisor, which is an automatic trading program exclusively for MT4 (Meta Trader 4).
Advances in technology have led to the creation of trading algorithms called “Expert Advisors”.
Expert Advisors are programs that allow the automation of the analytical and trading processes in the MT4 platform.
EAs will effectively monitor the market for specific conditions, and open and close trades, all without human intervention.
In the EA file, the trading conditions are described in a dedicated language, and by setting it in MT4, the program will be automatically executed and automatic trading will be possible.
Since only one type of automatic trading is programmed in one EA file, it is necessary to obtain an EA file for each automatic trading you want to do, reflect each on the chart, and execute it.
How to set up EAs on MT4 and MT5?
You can import downloaded or created EAs into your MT4 in the same way you would import an indicator.
On the toolbar click “File”, “Open Data Folder”, “MQL4” and “Experts”.
Drag and drop your EA into the “Experts” folder, and it should then be accessible through the “Navigator” window in your MT4.
The procedure is as follows.
- Go to “File” and “Open Data Folder”
- Open “MQL4”
- Open “Experts”
- Move the EA file into “Experts”
- Exit MT4 and then restart it
- Open the chart of the currency pair you want to trade automatically
- Open the navigator
- Drag the EA you want to operate in the “Expert Advisor” to the chart
More Expert Advisors are available to buy from the Market provided by MetaQuotes.
To browse the market, right-click on “Expert Advisors” in the “Navigator” window and choose between “Buy from the Market”, “Order your own Program” or access the “Online library”.
Merit and Demerit of EAs (Expert Advisers)
Although the use of EAs is very popular, there are always merit and demerit for any tools.
Let’s see the main characteristic of EAs below, and then see the merits and demerits of using EAs for trading Forex.
- Required amount of funds to run EAs
Both EA operation and automatic trading of FX brokers can be started with about 1,000 USD if starting with the minimum lot. On the other hand, if the repeat system does not have a certain amount of funds, there is an increase in the risk that it will not be able to generate a solid profit or that the account cannot be maintained due to large fluctuations. As a guideline, we suggest you to prepare enough funds to support the activity of EAs.
- Standard operating period
It is very important to let your EAs run for enough time. Especially the repeat system always operates with an unrealized loss, so if you do not get more fixed profit, the operation will not be positive. As a guideline, you may want to operate under the same conditions for at least one year, and preferably for several years.
- Your PC must be turned on at all times
EA operation cannot be traded unless the PC with MT4 or MT5 is connected to the internet at all times. On the other hand, for automatic trading systems of FX brokers, trading is done on the servers of FX brokers, thus investors do not have to keep their PCs and smartphones running.
Now let’s see the merits and demerits of using EAs to trade in the Forex market.
1. There are many choices
There are many products on multiple specialized sites all over the world, and many developers continue to develop new logic by analyzing market prices day and night.
If you include overseas as well, you would have a huge selection.
2. The cost is only the spread
Trading fees in EA operations are only the account’s spreads.
The automatic trading service provided by securities companies requires spreads and fees, so the difference in transaction costs increases as the number of transactions increases.
3. You can back test to see the results beforehand
You can use MT4 and MT5’s Strategy Tester function to test the results of running the EA in the past market.
The backtesting method is a bit more complicated, but it yields much more information than the automated backtesting offered by brokerage firms.
4. You can make your own EAs
Although there is a very high hurdle to write a program by yourself, you can also make your own EA.
Since the EA you made yourself understands the logic naturally, it has the merit of being much easier to operate than the EA made by other people.
And there are also some disadvantages when it comes to trading with EAs.
1. EAs are often costly
Since EA is basically sold for a fee, there is a purchase cost.
Selling prices vary considerably by the EA you choose.
Some EAs are distributed free of charge, but some of them can only be used with a specific unregistered overseas FX account, and you can see a scheme in which the provider gives cash back rebate depending on the transaction.
2. You cannot know the trading logic
It is the biggest feature of EA operation and also a problem.
In most cases, EA is a trade secret because the program content itself is the product.
Therefore, investors must operate without knowing what rules are used for trading.
It is important to perform back-testing and determine what kind of trade tendency there is, finding out that the EA has good results, and operate it.
3. EA operation requires some knowledge
In order to start EA operation, EA acquisition, MT4 EA setup, basic automatic trading knowledge, etc. are required, and the hurdle is quite high compared to the first trading in discretionary trading.
Some Tips on EA trading
1. Don’t give up too easily
Even if the result of the whole back test goes up to the right, if you look closely you might see that it is bumpy and there are some parts that are down.
It is natural for assets to decrease by the maximum draw-down range, and instead there should be a favorable period in which the maximum number of consecutive wins continues.
It is unlikely that anyone will suddenly stop EA operations when they are doing well and making a profit.
However, it is a common pattern that when something goes wrong, you stop operating immediately.
By giving up here, if you move it for a long time, you can not get the result even if it is close to the back test.
Of course, there will be a day when the logic of the EA will no longer be valid due to changes in the market trend.
If so, the EA is no longer in use or needs to be readjusted.
The criteria for such judgments are the maximum draw-down and number of consecutive losses in the backtest.
2. Don’t increase lots too much
If you increase the lot, money will increase when it is in good condition, but on the contrary, money will decrease when it is bad.
As mentioned above, EA operation is aimed at profit by moving the EA operation for a long time and reproducing the results as in the past tests as well as the current market prices.
Please decide the number of lots in consideration of the maximum drawdown and the funds.
Before getting used to it, it is important to start from the lowest lot.
3. Do not worry too much
This is also important for continuing for a long time.
A trade is to win or lose while increasing the total amount of money.
Therefore, there is no point in sticking to individual wins and losses.
There is no point in EA operation where trading is automated.
4. It is convenient to operate with VPS
In EA operation, since the PC connected to the Internet must always be started up, it costs electricity, and there is a possibility that the PC will stop due to a power outage or physical shock.
If you are serious about EA operation, you may want to consider using VPS (Virtual Private Server).
Since it is a service that has its own virtual desktop on the net, EA operation of MT4 and MT5 is performed in it, so it is fine even if the power of the PC is turned off, there is no electricity bill, and it is also strong against external factors.
In addition, since it does not go through a home computer, buying and selling are done at high speed, and the results tend to be slightly better.
5. Make your own EAs (Expert Advisers)
If a professional has the ming skill, you can make an EA yourself.
The important point here is that programming is just a means to program trading rules, and a good EA cannot be created without a dominant trading concept.
In other words, a good programmer ≠ a good EA developer.
Also, the skill of the program to make EA of MT4 is said to be not so advanced in the world.
In fact, many people are able to study and develop EA by themselves, even if they do not have professional experience as a programmer.