Expert advisors, also known as trading robots, are part of the majority of trading platforms’ tools, including the MT4. On the other hand, opinions about them do diverge. Some traders say they are an amazing success-boosting tool, while others shrug them off as useless, or even more so – harmful for healthy trading. So what is the reality like? Let’s take a look!
Expert Advisors – What Are They?
An Expert Advisor is an automated software program that executes transactions for the trader. Entirely computerized, it uses a set of rules to automatically close and open positions.
Benefits of trading with EAs
Extended Trading Hours
It’s difficult not to be appealed by a smart machine trading for you while you go out, sleep, or focus on other duties. As we will see later on, the money-making varies, but the 24-hour market watch is certainly a win.
Humans are imperfect. We are influenced by a variety of factors, and one that influences us most – a trader’s greatest enemy – is emotion. Needless to say, there is no risk for a trading robot to make decisions based on fear, greed or ego. This does, however, tend to be the case with human beings in the markets.
Scope, Strategy & Swiftness of Action
An EA can react to opportunities much faster than the average trader. Strategy-focused, lightning-quick action, with no hesitation or human factor errors (e.g: pressing ‘buy’ instead of ‘sell’). Additionally, it can monitor hundreds of markets at once.
Downfalls of Trading with EAs
EAs aren’t entirely automated. They need to be maintained properly and re-programmed accordingly when market conditions change. If a trader fails to do so – losses are inevitable. Even knowing when intervention is necessary, and when not quite so – can be challenging for a less-experienced robotic trader.
Unease of event reaction
As great as they may be, EAs have their share of error. Most importantly, they don’t function in relation to news and economic events. We know that once data or a piece of information is released, markets react fast, and traders should be there to adjust their decisions accordingly. Unfortunately, in cases like these, EAs are either too slow to react or get stopped out altogether.
Limited trading & shady vendors
Not only do most EAS work on just one currency pair, they also tend to be scammy. EA merchants capitalize on people’s deeply-rooted desire to make money with zero efforts. Advertised all over the cyberspace – a good share of these robots will not only fail to deliver the expected results, but also cause extreme fund loss.
*Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.