Expert advisors do they work or is it a waste of money?
Forex robots aka Exper Advisors are softwares that work as a fully Automated Forex Trading System and execute trades on both sides of the market 24/5 per week.
The most popular forex robots are offered via the MetaTrader-4 or MT4 platform. Forex robots provide an exciting way of earning profits in the online Forex market. Forex robots will save you loads of time analyzing the markets or sitting in front of your computer screen to monitor the markets.
Most investors understand that trading is very time consuming and could lead to stress, which could magnify losses instead of profits. Current Automatic trading technologies have made trading easier, less risky, and increased the chances of better performances. Yes we believe they work but only if you follow some rules which apply for automated trading.
I will highlight the following topics
- What are expert advisors
- Why do forex traders use Forex robots
- Advantages of expert advisors
- Risks of using an expert advisor
- Are expert advisors effective
- How to recognize a scam
- How to ensure that the EA really works
- Which platform to use
SO WHAT ARE EXPERT ADVISORS?
A forex robot operates within the popular MetaTrader4 trading platform to trade fully automated. A forex trading system is also known as Expert Advisor (aka EA) because they “advise” the MetaTrader monitoring software Basically, an expert advisor for MetaTrader 4 works by coding predetermined strategies or rules for making trade decisions. The rules are programmed on an expert advisor (robot), which it uses to enter and exit trades on the metatrader platform. Robots are capable of making trade decisions in a way that humans can’t. Robots can effectively scan the markets looking for trade opportunities with high levels of accuracy.
if you have a successful trading strategy that relies on indicators, candlestick patterns, support and resistance levels, you can code it in a robot and just sit back and allow the algorithm to do the work for you. Furthermore, if a robot is programmed to make a sell order whenever a currency pair reaches a resistance level, it will obey those instructions always. Time saving and reducing human errors are the main reasons why investors actually use expert advisors (ea’s).
WHY DO FOREX TRADERS USE EXPERT ADVISORS?
Robot traders can be defined in three groups.
- The serious traders looking for ways to save time
- Gold diggers looking for dazzling profits
- Beginning forex traders looking for professional strategies
The serious traders typically perform best with automated trading. They set realistic investment targets and are really checking out a system. Gold diggers on the other hand are only interested in the Holy Grail EA that will bring them wealth in a short period of time. Basically they make the same mistakes as manual traders.
ADVANTAGES OF EXPERT ADVISORS
- Trades the Forex Market in multiple currency pairs
- Trades the Forex Market 24/5 (day and night)
- Forex robots do not make order entry errors
- Most EAs are coming with money management features
- A forex robot does not get tired
- Eliminates Human Emotions such as fear and greed
- Can analyzes many charts simultaneously
- Forex robots are very easy to use
- May work on a Demo Account for testing before used for real trading in a Live Account
- Can be back-tested (testing historic performance) on MetaTrader-4 or other Forex Trading Platform.
RISKS OF USING A FOREX ROBOT
- No monitoring
- Can trade weak during news events
- Changing market conditions
- VPS/connection issues
I learned the hard way that using trading robots needs monitoring too. For example, who would dare to leave an EA running just before a brexit. Events like this can really hurt your balance. So once your Expert advisor is up and running, make sure to login daily and check the market situation. Specially news events can be having a large influence on your trading account. Understand that an expert advisor cannot detect if market conditions are changing. Therefore common sense is required to ensure the EA works as was projected.
ARE EXPERT ADVISORS EFFECTIVE?
I believe they are if used the correct way. Have you ever calculated how much time you spend in front of an MT4 terminal? Let’s do the math: Let’s say you spend 2 hours daily on trading. that is 40 hours daily and about 500 hours annually. And this is without the time looking on your mobile trading platform. An average manual forex account has $3.000 deposit. So even if you make 100% per year, you will make $6 per hour. Statistics show that over 80% of forex traders loses money, so you might probably not end in this group of winners. There are many strategies that do well, as long as you don’t end up making the same mistakes.
HOW TO RECOGNIZE A SCAM?
This is the million dollar question. If you think that a piece of software that you bought for a few hundred bucks will make you rich then we suggest you read this..
You are probably considering to purchase a money making robot to collect the cash day in day out and buy a nice sports car.
Well, if it would be this easy, wouldn’t we all be doing this? Many EA vendors claim to have the holy grail and this is the tricky part… they simply lie.
So before considering to start using EA’s make sure you understand how they work and how to monitor / manage them. The EA’s we offer on iForexRobot.com are no difference.
They need constant monitoring and sometimes simply need to be switched off.
The key of consistently making money in any market or asset class is that you understand why prices go up or down. So we believe that many Mt4 EAs out there are in fact profitable as long as its users keep monitoring their account as well as the markets.
Many people claim that an Expert Advisor doesn’t work. But if we show them a live track record that made 100% in a year without having to spend 5 hours per day in front of a screen they usually cannot show us their trading results. We simply focus on the best algo’s out there. Once the markets do not get along with the current trading rules, we remove the EA from our site. The developer should then first try to fix the issues.
So the key is to work with an Expert Advisor vendor that can tell you the exact ins and out of the EA. Furthermore a good tutorial will certainly help as well.
WHAT CAN I DO TO ENSURE THE EA IS WORKING?
If you want to know if a forex robot is as effective as you think, just check some unbiased reviews. But first make sure you installed the EA correctly. Make sure these reviews are authentic since most Forex EA review websites only promote their own product. Probably the most effective way to see if the EA really works is to simply test it. You can do this in either a demo account of even better in a live account. See what the robot does and if all trading rules apply. After all, it’s just a robot and not capable of human thinking.
For example, we started offering the Piphiker EA, which has many live track records that proves the strategy works. Also you can test this EA for free. This is kind of the maximum you can do to decide to trade the EA in a live account.
Maybe the most important thing to understand is that an expert advisor can never predict what will happen in the future. In case you are interested to test a well performing EA, you can click here.
HOW TO BACKTEST AN EXPERT ADVISOR?
For this specific question we wrote a blogpost where we outline a step by step tutorial how to run a backtest on an expert advisor.
WHAT IS THE AVERAGE PRICE FOR A FOREX ROBOT THAT WORKS?
This question totally depends on how the EA performs hence does the ex really work. The easiest way to calculate a fair price is to take your account size and see how long it takes to gain the purchase price of the expert advisors in trading profits. An expert advisors that works – or at least can prove this will cost between $100 and $500 for one account activation. If you want to spend more, fine, but know that more expensive does not mean the ea works better than a cheaper strategy. We like to focus on the support side. So to pay more for an ea that works is ok as long as the support is always responsive.
WHICH PLATFORM SHOULD I USE?
In forex trading most people know the Metatrader 5, Metatrader 5 and C trader as trading platforms.
More unknown platforms are TWS of Interactive Brokers. (C++)For all these trading platforms you can find suitable EAs. Important to understand is that each platform has it’s own programming language (syntax). This means that your EA for MT4 will not run on a MT5 platform. Since the Metatrader 4 platform is still and by far the most popular trading platform we only focus on EAs programmed in the MQL4 computer language.
After trying hundreds of expert advisors I concluded that it certainly has worked for me. The challenge will remain to beat the market over time. So in case you do not invest with your last money and you are ok with some drawdown once and a while, you should definitely give it a try. The typical time frame to become a professional forex trader you can bypass. After all, the robot is doing all the work.
If you want to know more about forex robots, click here.
This post was compiled by Sebastian from IForexRobot.com