An FX trader looking to automate their trading strategy with an algorithmic Forex solution, or replace it with a ready automated FX trading system, is bound to end up struggling to decide on the trading strategy rules. They could even struggle with the selection of the automated expert advisor itself.
Creating An MT4 EA Is Not That Easy
When it comes to switching your visual strategy to an autotrader, you will be surprised at how hard it is to translate the rules into a meaningful piece of code.
Whether it’s you or a pro MetaTrader 4 developer putting the expert advisor together, you will have to provide the FX strategy rules. And the strategy rules are not “buy” at the bottom, “sell” at the top. You have to give precise numbers and details on the MT4 indicators you want to integrate into your FX trading system.
For example, a condition would look like this:
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When the current price moves above the 50 MA at the hourly candle, buy at the candlestick close.
But, of course, forex trading isn’t as simple as generating trading signals with the use of one MT4 indicator. This is the simplest of its examples.
Once you are done with the trading strategy rules, it can get quite overwhelming to decide which optimization variables and metrics you want to play with to boost the EA’s live performance.
Should I Build My Own System Or Buy A Forex Robot?
It’s no surprise that most FX traders who seek a good Forex EA often end up hopping from building an algorithm to buying a ready-made Forex robot. In fact, it’s just like when an FX trader ends up jumping from one trading strategy to another!
It’s not easy. But, is this a good idea?
For starters, when you see a Forex trading robot come with some money-back guarantees, it certainly offers a level of security when you making a purchase. But, more often than not, vendors won’t honor your request. This type of vendor’s sole purpose is to take your money. And they will trick you by offering an unbeatable deal, on top of providing fake MetaTrader 4 results for the said EA. Due diligence on the vendor and on the EA itself is essential! Ask for the EA’s historical performance as a first move.
Finding a winning automated trading strategy is, by no means, an easy task. But a quick look around various forums will often reveal more negative reviews than positive reviews. Not too hard, then, to spot a scam!
Building your own MT4 EA is certainly not as risky, nor is it as costly as you may have in mind. You don’t need to build a Forex robot that takes trades automatically at first. You can start with a simple alerts EA that notifies you when certain conditions are being met, instead of spending all day looking at your MetaTrader 4 charts.
Why Do Most Trades Looking To Switch
One of the main reasons Forex robots are in demand is that they bypass the human factor. They only open trading positions according to certain conditions being met. In addition, the simplest answer is time.
Why spend hours looking at your MT4 charts for opportunities, when you could spend just a few minutes validating an alert signal? Or even checking your account, if you use an automated trading system.
Nevertheless, switching is not that simple. There are some drawbacks involved as well. A robot, for example, cannot easily recognize forex market shifts.
Forex EA’s are, therefore, vulnerable to this variable. This highlights the fact that when choosing or building an algorithmic Forex trading solution, you should consider that you will need clear and precise rules to build something good.
It’s not uncommon to find most beginners FX traders on the lookout for an MT4 expert advisor. Chances are that the FX trader tried manual Forex trading, lost money and then started looking for different ways of making money from trading the Forex markets.
But is this the right approach?
What Are The Advantages of Using An MT4 EA?
A Forex robot can trade round the clock, unlike a human being. Since the Forex markets are not centralized and operate 24 hours a day, 5 days a week, the potential trading opportunities one might miss without an autotrader can often be the ones to make a difference in your Forex trading account.
The biggest advantage of using an MT4 EA is the fact that trades can be taken while you sleep, work or relax!
As a matter of fact, many FX traders will use a MetaTrader 4 EA to avoid emotional trading. Beginner traders often mismanage their trading capital or take wrong trading decisions. An expert advisor fits in well to that type of FX trader.
Note that a Forex trading EA is built based on a trading strategy. The basis of the trading strategy could be a trend-following strategy that works on higher time frames. Or it could, perhaps, merely take advantage of the markets when they enter a sideways range. If you have your own strategy, you too can build or automate it and enjoy more free time, avoiding emotional trading.
Regardless, FX traders should note that Forex robots are not the holy grail. They are simply a manual trading strategy which has been automated. How successfully, is a matter of accuracy of translating the rules into code. The second part is easy for a professional MT4 developer. The first, is up to you!
What Are The Disadvantages of Using A MetaTrader 4 EA?
We talked about optimization in the first few paragraphs. There is a high risk that the MT4 EA settings have been optimized to bring about the best results when backtesting the expert advisor’s automated trading strategy. We refer to this as ‘curve-fitting’ and it’s one of the biggest pitfalls when backtesting a Forex robot.
Forex trading with an automated algorithm can often be expensive. But you can certainly purchase one for as little as $100 and use it to your advantage.
The question of how much you should pay is very subjective. However, it is good to know that in order to forward test the MT4 EA, it would require testing in live FX markets with real money. How much you want to throw in is at your own discretion.
Do I Really Need An Automated MT4 Expert Advisor?
Now that you have an understanding of the pros and cons of using an automated Forex trading strategy, the question is basically one of personal choice.
If you are short on time and can’t dedicate resources to learn Forex, investing in an automated trading Forex system could be the most ideal choice.
If you lack confidence in managing risk or you tend to make the opposite decision of what your Forex strategy tells you to, an expert advisor should help as well.
Don’t forget, expert advisors are not only helping with rule automation but also with your entry and exit policies. And more often than not, those are the main variables that lead to losses!