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Luke 6:38 - give, and it shall be given unto you... AGAPE.com
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Guest Article by Forex TradersUnderstanding the Pros and Cons of a Forex Expert Advisor Institutional trading has largely become a computer game, as large hedge funds and investment banks now hire people with Phd’s in physics and mathematics in order to develop highly complex algorithmic-based trading models that are fully computerized. This transformation of the institutional trading world has also trickled down to the retail arena, as the popularity of trading robots has exploded in recent years. In this article, we are going to discuss the pros and cons of using a forex EA and whether it is right for you. What Is An Expert Advisor? A forex expert advisor (EA) is simply a computer program that makes buy and sell decisions based on computer language. The internet is rife with expert advisors that promise unlimited wealth with little to no risk! As we begin our discussion of EA’s, remember that foreign exchange trading involves a significant risk of the loss of funds. Always beware of any marketing campaign or advertisement that does not communicate this truth. Why Use EA’s? Trading can be difficult. One of the most challenging aspects of trading is dealing with the significant emotional ups and downs that every trader faces. Staring at a price chart for hours on end can be very challenging and emotionally draining. For this reason, an EA may be very beneficial since it basically removes the emotional aspect of trading. Also, the reality is that most aspiring traders still have full-time day jobs. Since an EA is a computer program that automatically makes buy and sell decisions without human involvement, a trader does not need to be in front of the screen throughout the trading day. Pros and Cons of EA’s First the good. As mentioned, EA’s can really help eliminate hasty trading decisions and emotional swings because they essentially remove the human element from trading decisions. Second of all, they allow a person to be free and not tied to watching a price chart for several hours a day. Now the bad. The reality is that most EA’s which are sold on the internet do not work. Many of them are hyped up by companies that happen to be very good marketers and advertisers, but not good traders. Thus, it can be difficult to find EA’s that really perform well over the long term. Many of them are built to perform incredibly well in a specific market environment, but as soon as the market shifts, and shift it will, the EA could cause the fx trading account to drawdown to $0 in a rather short amount of time. No EA or trading strategy will perform well in all market conditions. This is one of the secrets of trading success. Therefore, if you do purchase an EA, make sure that you know what conditions it trades well in, and make sure to turn off the EA when the market is showing signs of shifting into market conditions that are not conducive to good performance. Building Your Own Today, there are numerous retail trading platforms such as Metatrader and TradeStation that allow traders with little programming experience the ability code out strategies on the GBP USD or any other currency pair. This is an option to consider if you want to take the time to learn basic programming skills. A simple google search will lead you in the right direction. Remember, there is no holy grail or $99 EA that is going to yield endless profits with little risk. However, a legitimate EA can be a viable option. Just make sure you do your homework and choose an EA that you understand. Risk Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. |
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