What is an Expert Advisor? What Are The Advantages When Used in Trading?
Expert Advisor or simply EA is widely known as the trading robot that runs under the MetaTrader 4 trading platform. The automated system of these trading robots is designed for several tasks such as sending emails and alerts to traders and also complicated tasks such as opening and closing trades on behalf of the trader. Most of the Expert Advisors that have nowadays are being used to fully automate the trading.
The MetaTrader API Develops the Expert Advisor
Just like the scripts and indicators found in MT4, Expert Advisors are also developed through the so-called MetaTrader API. This API has a very useful tool called the Meta Editor that transforms a source code into an EX4 file. This source code has all the rules found in a certain strategy which is expressed in a more understandable way. Most of the time, a programmer is tasked to convert the strategy used in trading into a code that will be accepted at the MetaTrader compiler.
But EA is won’t run in other trading platforms aside from MT4 and MetaTrader 5. Therefore, if you want to use this tool, you first need to download the MetaTrader trading platform into your computer, install it and use it to your advantage.
The Limitations of Expert Advisors
No matter how great an expert advisor is, it still follows the set of rules and data laid by the developer or the trading strategy that it came from. Moreover, the effectiveness of the trading strategy that the EA follows all based on the performance and competency of the trader. Let’s assume that the programs that are laid out in EA are implemented accordingly, the performance of the trading robot will still depend on the knowledge of the trading when it comes to the financial market.
Of course, these robots tend to trade without getting attached to all sorts of emotions, therefore, their ability to react to the abrupt changes in the market is also limited. This is true especially since most technical indicators consider the previous data when calculating following a price spike or a gap.
Another factor that limits the capability of an Expert Advisor is re-optimization. If you already know how the market runs, you will understand that the behavior of the market is inconsistent, no matter the time frame which is being observed. There are a couple of cycles and trends that the market undergoes and the EA that you have been using for a while might need to be adjusted every now and then.
More Functions of Expert Advisors
The limitations which were mentioned above will not generally affect those expert advisors that are not fully automated. The expert advisors under these functions typically focus on the improvement of the trader’s efficiency in dealing with the daily tasks. But the downside of these EAs is that they might not work independently and will have to rely on the data placed by traders.
Despite the limitations of these trading robots, they still remain a powerful and very useful tool in Forex trading. They give convenience to traders and that makes them a great part of MetaTrader 4.