1. EAs Can Trade For You 24 Hours A Day Without Sleep
The time that a human can venture for trading has severe constraints. This is due to the various human needs like food and sleep; also they need to indulge in other aspects of their lives like work, family, and friends. To be able to trade in the 24-hour currency market is nearly impossible for a human being. He is forced to trade at times during his waking day and this, in turn, causes him to miss out on the opportunities and entry and exit options that are offered by the other time sessions. But the EA does not sleep, and hence can work through the entire 24-hour currency shift market and can look for trading opportunities.
2. EAs Free Up Your Time To Do Other Stuff Instead Of Looking At The Computer Screen All Day
You can leave the Ea to do your work while you can go and have fun with your friends and family. The EA can liberate you from the computer screen prison and you will no longer be chained to the charts. You can also use the time to be more involved by researching and coding for new and improved ideas for your EA. You can also back test and optimize these ideas. So, instead of wasting your time on planning, executing and monitoring singular trades you can invest your time smartly in research and development.
3. EAs Operate On A Set Of Rules Without Greed, Ego, Fear Or Bias
The two biggest obstacles to successful trading are fear and greed. Fear can be an irrational force. It can make to too afraid to make a bold move to cut your losses, like when it prevents a trader from trading necessary trades or makes them hesitate for too long. It can also prevent a trader from a closing out a bad trade with a loss. Greed is the emotional opposite of fear and it can lead traders to make random trades or make them hold to their position for a longer period than what is dictated by their trading system. Humans also have their ego and bias to deal with, these can sometimes blind a person, i.e. they can make a trader unable to see thing critically and objectively as they look for confirmation on their hunches or only see what they want to see from the charts. It is very difficult for a human to overcome these negative emotions and biases as long as there is real money involved. EAs use historically tested strategies to get you in and out off the market and can help to combat emotions.
4. Most EAs Are Developed With Parameters That You Can Be Backtested And Optimized On Quantifiable Data
EA has had an epistemological paradigm shift in its favour and that is the ability to back test on quantifiable data. Prior to this developed the human traders attempted to back test in a very awkward fashion or did not back test at all. They used to print reams of historical charts and then “eyeball” the behaviour of the rules related to their indicators and make notes of the gains and losses in a ledger, but this was a very crude and time-consuming task. They back tested only on higher time frame charts and preferred not to go back too far in time due to this very time-consuming nature of the task. Furthermore optimizing was made exceedingly difficult as each change in the rule or parameter of the indicator would force a repeat process. EAs conduct these necessary tasks in minutes by using the built-in back testing and optimization engines, which really is incredible. Metatrader servers store a huge quantity of downloadable and free historical data, in intraday format from 1999 till present and daily or greater from 1971 till present in order to assist with the back testing.
5. EAs Are Able To Identify And React To Opportunities Faster
You will neither have to worry about missing a trading opportunity of you are not staring at the right chart closely enough nor will you have to waste precious seconds entering an order manually while the market moves away. The markets are monitored, the opportunities are found and identified based on coded rules and are executed based on these rules all in a matter of second by the EA as it uses the speed of the computer for all this.
6. Now Trader Can Get Their Feet Wet Trading With EAs Without Having An In-Depth Knowledge Of Forex
You do not have to start out as an expert trader and programmer when using EAs. You can run free EAs on your computer and there are a lot of them available. You should forward test each one on virtual money prior to trading live and you also have to properly backtest each one to see if it matches your performance and risk criteria. This will give you more free time which you can use to learn more about forex, trading, and programming so that you will be able to develop your own EAs.
7. You Can Make Your Strategy Far More Sophisticated Than You Ever Could Trading Manually
There are complex systems that can include multiple conditions for their entries and exits, profit targets, protective stops, trailing stops, and filters, and have them all automated simultaneously and EAs can give you the potential to trade with these systems. The human brain as powerful as it is cannot multitask dozens of operations like a computer can and here is the need for such a system.
8. EAs Consistently Carry Out Trading Plans
You need to make a trading plan and then stick to it with the utmost discipline, almost all wise traders will tell you this much. But it is also true that most human traders either don’t have a trading plan or don’t stick to their plans. An EA will stick to the plan without a single exception. If you are undisciplined in your private or professional life then EA is the best way for you to be a 100% disciplined trader overnight.
9. EAs Can Monitor Many Currency Pairs At The Same Time, Giving You Trading Opportunities Than Otherwise
You no longer have to keep track of your favourite currencies yourself by staying glued to the screen. Dozens of currencies can be monitored efficiently and effortlessly if you have an EA.
10. EAs Make Life Easier
Doing one’s homework on the market day, watching the markets for opportunities, carefully entering into trade and then spending a good deal of time babysitting that trade, these are the things that a manual trader needs to do in order to be a good trader. This process is quite arduous and has to be repeated for every trade and every single day. Hence, it is very stressful and it is a lot of work. Once you get an EA, it takes over effortlessly and does the most reliable work. Once you do this both your workload and your stress levels will go down and you will feel a great weight lift from your shoulders.
1. In order for an EA to behave properly, it has to run 24 hours a day on a decent computer with a reliable internet connection. It can also be run on a Virtual Private Server that is affordable. Only in such a scenario will it take all the trades that it was designed to take. But you can rest knowing the fact that there many low-priced and reliable VPS providers and that most of the internet connections if up 99% of the time.
2. Brokers who have tight spreads have access to many commercial EAs that are designed to work best win those conditions. This more so true when they are scalping EAs. If the EAs are scalping you have to see if the spreads of your brokers are low enough for the pairs that your EA is trading. You will also have to ask your broker whether or not it is scalping.
3.Even though some EAs can work for multi-pairs, they are more often only coded for one pair. This is due to the fact that despite the >80% correlation between many of the formulas and conditions, they all work differently across different pairs.
4. It is not advised that you intervene on the EA manually. This is simply because the creators of the EAs have done all the proper back testing and optimization. Also, they a better understanding of the EAs inner workings.
5. Most EAs are vulnerable when the market becomes sideways as they work on trending markets and also because they are mathematically and technically based. The EAs get chopped when the markets enter a low pip range, this is when it is said to be in sideways activity.
6. Fundamental data such as economic and political events cannot be easily be read or deciphered by the EAs. But the EA can read it if the result of the event is impeded in the price action. But an EA can get stopped out if there is an extreme event that quickly reverses the market direction. Alternately it may cause the EA to enter too late in a new direction.
7. There are very little examples of robust EAs and hence most EA strategy developers find it difficult to plan and design such EAs. There are also many coding and optimization pitfalls like over-optimization and curve fitting and most of the developers have no proper method and criteria.
8. It is always best if the EA developer is an excellent coder and an experienced trader who has enough humility to feel that he knows only a little about both those things. This is quite a hard juggle. It is also common that the excellent coder knows nothing of trading and that the experienced trader cannot code worth a dime. There is still the ego factor to deal with when you, by some luck find both these things together. While to craftsmanship pride and ego is a good motivator, to learning and growth they are dead end allies. It always helps if the coder and trader is humble and passionate about learning, renewing and growing their ideas about the market and how to code for them.
9. Almost 95% off EAs end up either losing a bunch or manage to stay barely alive. But on the flip side, almost 95% of all manual traders fail too. There are a few factors which give EAs an edge over the manual traders. But despite this fact and without the emotional and physical limitations of a human the EAs still cannot win as the markets are exceedingly difficult.
To summarize EAs have the ability to consistently follow a trading plan and trade 24 hours a day by acting on predefined entry and exit conditions. You can spend a lifetime investigating and researching on thousands of EAs in numerous online forums because Metatrader 4 (MT4) is such a big platform. You also have an endless supply of education out there to help you code your own EA. You must always remember to test an EA on plenty of historical and forward data, regardless of whether or not you borrowed or created you won EA. You will be able to test the EA in the forward condition if it proves to be promising when you perform back tests on MT4.
You can also test in non-expiring demo accounts until you get enough confidence and understanding to test the Ea on real accounts. This approach can be contrasted with borrowing or creating a manual system. It would be difficult to back test the manual system properly with a method other than the biased eyeball method. Beyond that, the human trader would have to sit in front of the computer for numerous hours looking for the trade setups and exit opportunities as it is required by the manual system. But EAs can actually free up the trader to do other things. The trader will also be able to focus on their day jobs, hobbies or family as they won’t be required to physically be around. You can also improve your trading and coding skills by using this free time.
Trading with EAs on its own won’t make you rich, but it can actually make you poor if you use them in real accounts. Almost 95% of all the EAs that one purchases or creates will turn out to be unprofitable over time according to my estimate, which is quite unfortunate. EAs can transcend many human problems and limitations like time, speed, greed, fear, ego, diligence, consistency to trading plan etc. But regardless of this fact it is very hard to construct a robust EA which has not been curve fitted.
Also, even the best-conceived robot won’t be able to keep up as the brutally tough market which has a high degree of unpredictable volatility and randomness would degrade it. But despite this horrible reality, I still like to find or create promising EAs so that they can be tested in unexpiring demo accounts, in the hope that I may find or make my pearl in the pile. We would all be able to create a bunch of EAs that can make us rich if the market weren’t so tough. But this would also mean that the trading world would be, oh so dull. This is because the challenge would be less and so there would be fewer propensities to dream the impossible dream or fight the impossible foe.