Online trading carries with it a number of rules, tools and software that you can use to maximize your earnings.
One of those tools is a trading robot also known as an Expert Advisor (EA). If you don’t know what they are, read more at the Forex Expert Advisors guide before reading any further.
A trading robot is basically a software that uses a set of rules to determine whether to buy or sell at any time. There are trading robots for both Forex trading and Binary Options.
These expert advisors can be used to improve your trading experience. They function as assistants per say and can provide you with information to make a more reliable trading decision.
You can also program an EA with a set of rules to make a trade for you when you’re away. This is known as automated trading and is one of the numerous advantages of using a trading robot.
Advantages and Disadvantages of a Trading Robot/EA
While there are binary options robots, forex trading robots are more commonly known. They both offer a similar set of advantages and disadvantages that you need to be aware of before you decide to use one.
- EAs trade at any time of the day – while you have biological needs and other responsibilities, your EA does not and can easily perform your trades for you while you are away living your life.
- Expert advisors operate solely on rules rather than human emotion – sometimes our emotions get the better of us and we make a bad trade either because we are afraid or because we got greedy. Because they are machines, these problems don’t occur, meaning you are less likely to suffer losses caused by irrationality.
- EAs are developed to backtest data and optimize accordingly – due to the sheer volume of trading data, it can be enormously time consuming for us to manually review historical charts and backtestdata, whereas an EA is developed to do so with ease which results in less time spent on our side along with more accurate information.
- Expert Advisors are a great help to help new traders – as mentioned before, they work as assistants and can be an invaluable asset to a new trader who doesn’t have the extensive experience and knowledge that more seasoned traders have.
- EAs can spot opportunities quickly and act faster – there is a limit to how much a human being can monitor and we therefore miss many opportunities because we were looking at the correct chart. An EA is designed to observe numerous charts and notice changes and advantageous opportunities and act much more quickly.
- Expert advisors allow you to observe multiple trading pairs thus resulting in more opportunities for you to profit from.
- An EA allows you to make use of more sophisticated trading strategies that you may now have been able to manually.
- An EA never fails to carry out the trading plan set by you which means that no matter the situation, it will follow your guidelines without fail.
In short an EA makes life easier, like any robot should. It takes a lot of the manual labor and hassle out of your everyday trading, freeing up time for you to take care of other important matters and living your life.
While EAs do indeed have their advantages, they also have their disadvantages.
- Many EAs are developed to work best with tight spreads.
- A majority of EAs are coded to work on a single pair but there are some which can work on multi-pairs.
- It is ill advised to tamper with an EA because this can cause it to perform poorly.
- An EA needs to run on a good computer with internet 24 hrs a day but you could also get a Virtual Private Server.
- Due to the basis of most EAs, they tend to become useless when the markets enter into a low pip range or go sideways. They are best for trending markets.
- EAs find extreme difficulty reading fundamental data such as political and economic events, eg. Brexit. The sudden change can cause the EA to either enter the new direction too late or get stopped out.
- Numerous Expert Advisors have pitfalls because many coders do not have extensive trading knowledge and vice versa.
As mentioned before, Expert Advisors have their advantages and disadvantages and they should both be taken into consideration when making your choice. There are both free and paid EAs, each with their own features and own ROI.