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What is a Forex EA & Is it Profitable?

While intricate, a Forex EA (Expert Advisor), better known as a robot is simply an automated tool that trades for you. It follows a specific set of rules that determine a Forex trading strategy, which it uses to open and close buy/sell orders in your Metatrader 4 (MT4) or Metatrader 5 (MT5) platform.

The robot can be used on both live or demo accounts, and can be left on 24 hours a day to place trades even when you aren’t at your PC or MAC (robots are not available on mobile devices). This is perfect for traders that have specific strategies they want to trade during different market sessions, like Americans that want to scalp the Asian Session while in bed.

There’s a lot of interest in automated trading because it allows for passive income without emotion, or even prior experience in the markets. This does not mean that every robot is viable, but there are plenty of different systems that are.

Today I’ll introduce you to Forex EA’s, explain what they are, and how to use them properly in your trading routine.

What is a Forex EA?

I’m frequently asked what is a Forex EA or robot, and how do I use it? As I introduced earlier, an Expert Advisor is an automated trading strategy that places trades on your behalf, without your intervention. The EA’s are written in the MetaQuotes programming language which makes them compatible with all Forex brokers that offer the MT4 & MT5 platforms.

One of the main reasons these robots are mainstream now, is because the Metatrader platform is the most popular platform supported by brokers and used by traders. There are currently over 200 different brokers that use the platform, and millions of active traders. Only a small percentage of these traders utilize robots, but this number is rising daily.

Forex Expert Advisors are easy to acquire. They can be downloaded for free or purchased from a number of sources.

Naturally, you will have more long-term success with paid EA’s, as they are updated more frequently, and have more skilled coders. The reason for that is simple, money talks, and all of the best developers want to get paid for their expertise. That being said, Free Forex Robots serve an important purpose, which is to introduce traders to automated trading free of cost, and help them deal with the short learning curve.

To trade with an Expert Advisor, there is little experience necessary. Installing it is easy, but it’s still a great idea to install a free version first to see if you are comfortable with the process. Usually, I recommend traders play around with a free robot for a few days before picking out a commercial product that will be more reliable in a live trading environment.

Now, let’s get into more detail about the methodology behind each robot.

What Trading Strategies do Forex Expert Advisors Use?

One of the benefits of Forex EA’s is that they can simulate every single trading strategy. The coders of the software can set specific rules, use Forex indicators, mathematical analysis and then test that strategy against historical data to see how profitable it would be over a set period of time. This process is called back-testing or strategy testing.

This strategy testing process can take weeks, and incredible amounts of computing resources depending on how many different settings or variables the developer wants to test. Before releasing an Expert Advisor the public, development teams will “optimize” the software, by testing thousands of different combinations of their settings.

In the image above, you can see the optimization of a basic Expert Advisor, that has only 5 different settings, Lots, MaximumRisk, DecreaseFactor, MovingPeriod and MovingShift. Even a simple robot like this one, can still take weeks to optimize if the testing period is long, and the developer wants to test many different configurations.

Once the testing process is complete, the tester can go through the specific numbers, and look at graphs like the one above to determine the viability of that trading strategy.

While strategy testing isn’t difficult, it is not a requirement for traders, and is utilized more by detailed EA development teams.

5 Trading Strategies Used by Most EA’s

As explained earlier, EA’s possess the ability to utilize any Forex trading strategy. Here are some of the most common types of automated trading systems you’ll come across:

  1. Trend Trading Expert Advisor

One of the most popular expert advisor strategies is trend trading. For this approach, robots will generally use multiple momentum indicators like the Moving Average Convergence Divergence (MACD), and the Relative Strength Index (RSI) to determine market direction. Once the system recognizes the direction, it will open a buy or sell trade, in an attempt to exploit the directional momentum of the market.

2. Price Action Trading Expert Advisor

As price action is one of the fundamental trading strategies, it’s no surprise that many EA’s utilize this approach. In order to provide trade opportunities, these robots can use many different methods to determine support/resistance levels. Often, the systems will use indicators, oscillators, fibonacci retracement and basic trend identification.

3. Scalping Expert Advisor

One of my personal favorite Expert Advisor trading strategies is the scalping approach. This is one of the most popular robot methodologies because robots can make split second decisions that humans can’t.

Scalping robots look to get in and out of the market quickly, winning many small trades throughout the day. This approach often works very well in ranging markets when there are small movements.

4. Martingale Expert Advisor

Many robots use a martingale trading strategy, as the foundation of their methodology. This approach relies on doubling up after every loss, in order to recover past losses. When used in conjunction with strict rules and other trading strategies, it can be profitable, but it is best known for blowing accounts. It does this often, because a prolonged losing streak is all it takes for the martingale strategy to be completely burned.

5. News Trading Expert Advisor

This strategy is pretty self explanatory, but many EA’s use a News Trading approach. These robots monitor news releases and attempt to take advantage of price moves that occur due to that news. This approach is quite difficult for robots as humans can do a much better job at understanding the implications of a news event.

How Well Do Expert Advisors Perform (Trading Results)?

The performance, or trading result of each Expert Advisor is determined by many different factors. In order for a robot to perform well it must have all of the following aspects covered:

  • Dedicated development team with Forex analysts
  • Regular updates to adjust to current market conditions
  • Properly written code with no errors
  • The ability to run alongside other programs without interfering
  • Support staff that is available to answer questions regularly

If each of these elements are provided, then your EA has a high likelihood of providing you with the returns you expect.

One of the best recent developments in automated trading is the creation of statement sharing services like Myfxbook, and FX Blue. For many years, traders had no way to prove the viability of their Expert Advisors, but that’s no longer the case.

Verified Myfxbook trading account (Proven Results)

Myfxbook and FX Blue allow traders to upload their trading statements directly to their websites to share with whoever they want. My favorite is Myfxbook, because they make the trader change their investor password on their trading account to completely verify the account. This means, that results on their platform are proven and can’t be cherry picked, modified or manipulated in any way.

In the early days of automated trading, Forex robots earned a very poor reputation because there was no service holding developers accountable. Most product producers would manipulate their results, show screen shots of only their best trades, and then sell something far from profitable.
Unverified trading account screenshot (Unproven Results)

Some vendors still try to sell products in this manner, but with the education of traders, it’s almost impossible to sell trading services without verified results. The message is simple, anyone can develop an Expert Edvisor that wins trades, but very few can develop an Expert Advisor that wins trades over an extended period of time.

In addition to providing verified proof, statement sharing service providers give complete data. So, even if you are trading manually, you can use a service like Myfxbook to look at the following advanced statistics:

  • Amount of trades placed
  • Average trade length
  • Winning percentage
  • Best trade / Worst trade
  • Overall lots traded
  • Average win / loss in pips
  • Overall pips traded
  • Profit factor
  • Risk of ruin

This data can be utilized for many purposes, but the main reason is to prove the long-term viability and for traders to see exactly how an Expert Advisor trades. That way, traders can determine if a robot is suitable for their trade approach before they even sign-up.

Should You Adjust Forex Expert Advisor Settings & Parameters?

Every Expert Advisor comes with different parameters or settings that can be adjusted by the client to change how the software operates. When you first start with a robot, you will get an out of the box setting created by the vendor for you to use immediately. Some systems have hundreds of different settings, but for the purpose of this article, I’ll introduce you to just the important features:

  1. Take Profit (TP)

The take profit or TP is the pip amount at which the EA will exit the market on a winning trade. For example, if your take profit is set at 50 pips, the software will exit the trade when it hits 50 pips in profit.

2. Stop Loss (SL)

The opposite of the take profit, the Stop Loss is the pip amount the expert advisor will close a trade at a loss. For example, if your stop loss is set at 20 pips, the robot will exit the trade when it hits 20 pips in loss.

3. Money Management (MM) / Risk

Most EA’s use money management in conjunction with another setting labeled Risk, or something similar. If money management is active (set to true), then it will use the number you set for risk to determine the lot size. So, if you are setting your risk to 5%, then the robot will risk 5% of your account size for each trade. Thus, if your account grows, the size of the trade grows accordingly, providing compounding profits.

4. Trading Days

If there are certain days you don’t want your expert advisor to trade, you can set them to true or false in the settings. Most traders, including myself will set Friday trading to false, because we don’t like traders to be held over the weekend. Frequently, trades held over the weekend can spike when the market reopens in an unwanted direction.

5. Trading Hours

In more recent years, EA’s have started adding the ability to let traders set trading hours. So, if you wanted to exclusively scalp the asian markets, you can set the software to only open trades during that session. The trades will still be closed by the TP or SL set, but will only be opened between the specific hours that you set.

There are obviously many more settings, like trailing stop loss, martingale, hedging, news filters, but these are all specific to the EA developer. Not every one of those settings is used by each product producer, and the ones that are, are generally used in a specific way that’s better explained in each project.

The question remains though, should you change your expert advisor settings? To this question, I always say yes. Even if you are a new trader, you should always be making adjustments and testing. The developer settings are usually solid, but they are not always going to be the best for you. So, while you are trading with the default settings on one account, you can easily open more accounts to run your own tests. When running a robot, I usually have over 10 demo accounts running on my computer, and when I find a setup I like, I use it in a live account.

Which are the Most Proven Expert Advisors?

I don’t mean to brag, but I think I’m the most qualified in this market to answer this question. I’ve been testing and reviewing automated trading products since 2008.

Not only have I been reviewing robots, but I’ve also been developing them too and I own the top two rated products in this market, Forex Fury and Forex Steam. If you go to the Best Forex Robot section of the website, you’ll see the rankings, and performance numbers that have led to those rankings.

#1 Forex Fury

Forex Fury is the #1 ranked Expert Advisor in the market. It works in all countries and is compatible with all MT4 and MT5 Forex brokers. Here are some of the main features:

  • Win rate over 90%
  • Verified trading results on Myfxbook
  • Priced at $229
  • Running for over 5 years

#2 Forex Steam

Forex Steam is the #2 ranked Expert Advisor in the market. This robot has been on the market for over 10 years, but our team still update it regularly.

  • Regular updates
  • Priced at $117.99
  • Running for over 10 years
  • New settings and strategies developed regularly

Are Forex Expert Advisors Profitable in 2021?

Absolutely. As long as you have the right system, suited to your trading style, you will be able to profit and develop a passive income.

There really isn’t a difficult part of the process, outside of finding the robot that you want to purchase, but don’t sit on the sidelines too long. The best thing you can do when getting involved in automated trading is dipping your feet in the water as fast as possible. Whether that is with a free Expert Advisor, or a paid one, you want to gather experience quickly.

The sooner you set up your demo tests, and establish yourself within the learning curve, the sooner you’ll be profiting in a live environment.

Conclusion

Automated trading with an EA is an excellent way to enter into the Forex market and create a passive income source. That doesn’t mean that it’s fool proof, or that you will be profitable within the first few days, but it is a viable opportunity.

I’ve been involved in automated trading for years, and have very positive experiences trading with Expert Advisors. I hope you will join me, and find similar success for yourself.

About Patrick Ryan

Patrick is a Forex enthusiast, with over 10 years of experience in finance, and market analysis. He's eager to help traders achieve their investment goals, whether they are short or long-term. Patrick's penned thousands of reviews, and is always available to discuss trading with anyone who's interested.

2 comments

  1. hello, which EA is more beginner friendly, Fury or Steam…thank you.

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