Trader involvement in Forex MT4 Expert Advisor trading.
Inherent weaknesses of Expert advisors
Forex Expert Advisors have inherent weaknesses. EAs use testing based on historic price action to determine their potential profitability. There is no guarantee that the same price action will happen again. The other constraint is that EA optimise settings using an average of many transactions – ideally each transaction should be optimised such as is the case with manual trading. Certain EAs do well in trending markets and others in sideways markets. The market oscillates been these phases all the time.
Option 1 of how to use Forex Expert Advisors
Most traders have this dream. I am going to buy this EA and use the suppliers suggested settings and make a fortune in the next year. This dream is possible but at the same time unlikely. This is known as the “Set and Forget” option.
The main reason for this is that EA’s need managed on a continuous basis while they are going traded. EAs use testing based on historic price action. There is no guarantee that the same price action will happen again. The other is that EA optimise settings using many transactions – ideally each transaction should be optimised such as is the case with manual trading.
Option 2 of how to use Forex Expert Advisors
This option requires continuous effort from your side to: –
Initially you need to: –
- Select which currencies to trade
- Determine which timeframes to trade
- Find settings that give a good balance between risk and reward.
- Learn exactly how the EA identifies entries
- Determine exactly what exit alternatives there are
- Establish in which market conditions the EA performs well
- Identify what the EAs strengths and weakness are
Then as time goes on you need to: –
- Continuously update your knowledge of the above points
- Update the settings as result of up to date tests.
- Look for filters or EA changes that will improve results
So it looks like there are only 2 choices. Either you use the set and forget approach and use supplied settings and hope for the best or you invest time and effort to trade EAs in the best way possible. Given the inherent weaknesses of EA trading it is not a good idea to take chances.