What is an expert advisor? And why would you need one?

In this blog you will discover what an exper advisor is, what advantages it has and what type suits your style. Moreover I will share some tips to increase your odds to beat the market

A trading robot, also known as an expert advisor(EA), is a piece of software that is programmed with a set of instructions for automatically making trading choices without the trader's direct action. After you've decided on a strategy, you can either program it into an expert advisor or utilize a forex EA generator to build one. The advantage of EA builders is that no programming or other technical abilities are required Try our free demo to experience an expert advisor builder. There are also more software packages that allow you to create and use a trading bot, read more about Metatraders software and experts advisors.

Most expert advisors are based on technical analysis and indicators of forex market activity and frequently operate similarly, regardless of the sort of EA a trader has programmed or purchased. When market conditions match the established rules, the expert advisor will provide buy and sell recommendations.

While most expert advisors come with pre-programmed default parameters, these settings may be changed to fit a trader's risk tolerance, capital outlay, and other personal preferences. Typically, a trader may alter the technical settings to meet the current market conditions, thereby increasing the robot's profitability. As a result, an expert advisor generates signals whenever the specified market parameters and other trading requirements are satisfied.

This article explains what an expert advisor is and offers suggestions on how to utilize them profitably. Continue reading to learn more.

An expert advisor example

To further understand how expert advisors function on MetaTrader 4 or 5, consider the EUR/USD daily chart with Bollinger bands applied.

Image showing bollinger band breakout. Green line signals the trade entry.

Price burst out of the Bollinger Bands, as seen on the chart, signaling a good purchase opportunity, at the green line. If you are a manual trader, you will spend all of your time staring at your computer screen, seeking such possibilities. However, if the Bollinger Bands trading strategy were coded into a expert advisor, trades are initiated automatically without your direct interaction. And you would have bought at the green line. While you may spend your time doing other things like wandering along California's beaches. Nice?

When the robot determines that the requirements for initiating the trade using the Bollinger Bands technique have been satisfied, it will place a buy order at a price specified in its trading settings.

Profits can be taken at a predefined level by the robot. When the threshold is achieved, the transaction is immediately exited and gains are booked

Similarly, the robot can have a predefined stop-loss level, which minimizes losses if the deal does not proceed as planned. If the stop-loss threshold is reached, the robot will immediately leave the transaction and book the losses.

What are trading strategies?

As the example demonstrates, a trader utilizes a set of guidelines known as a trading strategy to purchase and sell. A trading strategy would typically be developed and followed manually, but you can also utilize computer programs to carry out an automated trading plan. This is what an expert advisor can do for you.

A trading robot however is not a real robot; rather, they are highly specialized computer programs that have been developed to perform a variety of trading duties. Within Metatrader they are often referred to as expert advisors or sometimes as bots. These can include signals, which inform traders when to take a trade or automatically place and manage deals on the trader's behalf. It may be a pre-built expert advisor with built-in trading rules, or it might be a custom system the trader created to adhere to their trading style.

If you have little experience with trading, it is usually preferable for you to use trading software such as Metatrader. Rather than building a trading bot with Python or C++ and coding it yourself. There are several different forex software providers available. Metatrader is my favorite. But you can conduct your research to determine which software is the best fit for you.

If however, you have seen a marketplace that sells trading bots, or a website that sells trading bots, it is vital to conduct research. Some of them are well-respected systems, others may be subpar or even frauds.

Additionally, be certain that you fully comprehend the robot you select and that its operations align with your trading objectives. Considerations include:

  • Backtesting: A variety of currency pairings and various market situations should have been used to backtest the robot. If you don’t know what backtesting is, we will explain it later in this article.
  • Order size: Some robots work best with a specific order size, so when the order size varies, things could go wrong.
  • Outcomes from live trading: Verify that the results claimed are based on trading on actual markets, not merely simulations.
  • Drawdown: This describes the difference between a trading return’s high and low points. Or how much money you would have lost, if you started trading at the worst possible time for the trading strategy. You should pick a robot that suits you because every trader has different personal preferences when it comes to drawdown. In my opinion, a drawdown is the most important metric.

What type of expert advisor suits me?

There are two kinds of automated trading systems:

1. Completely automated

Based on a set of established rules, a fully automated trading system analyzes the market for trading opportunities and executes transactions electronically on behalf of its user. As soon as a trade is entered, it produces stop-loss orders, trailing stops, and profit objectives.

There are various advantages to using a completely automated system that you should examine. These are some examples:

  • Speed: A machine can identify and act on market opportunities considerably more quickly than a person.
  • Discipline: Emotions may obscure a trader's judgment; machines, on the other hand, are immune to fear or worry and will always follow the plan
  • Time: Using a fully automated system eliminates most of the effort involved in trading, freeing you up to do other things.

If you don't have much time to commit to trading, or if sticking to a trading plan is tough for you, a completely automated system may be a decent solution.

2. Semi-Automated

A semi-automated system analyzes the currency markets and looks for trading opportunities, again using a pre-programmed trading strategy. It then provides the user trading signals with entry prices, stop-loss orders, and profit objectives, and the trader must decide whether to act on them and manually make the trade. This approach, like complete automation, frees up the trader's time by handling much of the preliminary work for them.

It can scan and analyze markets far faster than a human can, and it helps to eliminate emotional trading by giving warnings based only on strategy. This technique may be better suited to a trader who has more time to spend on forex but wants to automate some of their activities.

Using a semi-automated method gives the trader greater control over their account and allows them to apply their skills, experience, and expertise before determining whether or not to make a deal.

Pros and cons of an expert advisor

People utilize expert advisors for a variety of reasons. However, before acquiring and utilizing an expert advisor, it is critical to assess the benefits and drawbacks of employing an automated system, as well as recognize that no expert advisor can provide the perfect trading solution. Many novice traders opt to employ an expert advisor to simply make money from the forex market without having to spend a lot of time trading or doing any activities manually. However, they are not certain to be profitable. Before using one, traders must first pick a suitable currency pair or index and the best period for trading.

The benefits and drawbacks of employing a expert advisor are described in further detail below.

Benefits of an expert advisor

  • They can trade 24 hours a day.
  • They are not swayed by human emotions, allowing them to function more quickly and effectively.
  • They can work more quickly and efficiently.
  • They are capable of executing more intricate and sophisticated trading methods.
  • They facilitate and accelerate backtesting.

Disadvantages of a expert advisor

  • You must have a robust and consistent internet connection. However, if you use a virtual private server (VPS) this is not an issue.
  • They are incapable of human cognition or imagination.
  • They are not adept at reading and analyzing fundamental data.
  • It is hard to program an expert advisor yourself. With the help of the Trading Bot Generator, however, you can create one in seconds.
  • There is a possibility of data-mining bias.

Advantages of using expert advisors

They can trade 24 hours a day

Human traders are frequently limited to trading at specific times of the day and will have other responsibilities such as family, job, and leisure hobbies. Even the most devoted forex traders will require pauses to eat, drink, sleep, and get away from their computer screens. A expert advisor can operate constantly without interruptions. This means they will always be observing and acting on the market, ensuring you never miss an opportunity.

They are not swayed by human emotions

expert advisors follow a set of pre-established rules that they will always follow. When people exchange money, it can be challenging for them to get past feelings like fear and greed as well as their biases and presumptions. This may cause people to pause, forgo making trades, force them to make bad deals, or force them to maintain their position for an excessive amount of time.

In the heat of the moment, traders may find it challenging to think critically and objectively, even when they have a solid strategy in place. An automated method eliminates the danger that trading can include due to human emotions.

They can work more quickly and efficiently

In a matter of seconds, an expert advisor can scan the markets, identify opportunities based on pre-set criteria, and execute trades following its rules. A human trader performing this manually would probably take much longer and run the risk of missing out on possibilities or squandering time making judgments or placing orders.

They are capable of executing more intricate and sophisticated trading methods

Using an automated system enables traders to have many conditions for things like entries and exits, stop-loss orders, and profit objectives, all functioning at once because robots are far better at multitasking than humans. Additionally, many currency pairings can be watched simultaneously by expert advisors

They facilitate and accelerate backtesting

Backtesting is the act of analyzing historical data to evaluate potential trading strategies and then using that information to optimize a strategy that has been selected. It is complicated and time-consuming to do manually. expert advisors, on the other hand, can download, store, and analyze substantial volumes of historical data, enabling traders to assess the performance of a trading strategy in great detail.

Disadvantages of using ans expert advisor

You must have a robust and consistent internet connection. However, if you use a virtual private server (VPS) this is not an issue

A strong computer with a dependable internet connection is required to run expert advisors. Any lags or issues could result in hiccups or force the robot to make bad trades. They could potentially be compromised by viruses and hackers, just like any other piece of computer software. However, if you use a VPS you have a cloud-based pc. This cloud-based pc has none of the mentioned issues. Most VPS services offer an uptime of 99,9%. Meaning they always work.

They are incapable of human cognition or imagination

To foresee how markets may develop shortly, successful forex traders use a variety of abilities and knowledge, including research, analytical thinking, observation, and a certain amount of imagination and creativity. Expert advisors may not be as effective as human traders because they can only trade according to their original programming and prior performance.

They are not adept at reading and analyzing fundamental data

Technical analysis, which involves interpreting previous market data and price charts to forecast potential future outcomes, is a skill that expert advisors excel at. But when it comes to fundamental analysis, they are not very useful.

Fundamental analysis is a technique for determining an asset's worth by taking into account external factors and influences, such as societal, political, and economic developments, as well as market patterns.

While a person can keep up with current events and how they affect the markets, a robot's ability to trade profitably could be greatly hampered by a sudden market reversal brought on by an extraordinary incident.

It is hard to program an expert advisor yourself. With the help of the Trading Bot Generator, however, you can create one in seconds

If you want to build one from scratch without any programming experience creating a trading bot is hard. Most trading bots take 3-6 months to create. If however, you are a skilled programmer creating one might take you a month. Solutions to your problems on StackOverflow however are hard to come by. And this will certainly delay your trading bot development. Creating a trading bot yourself is not easy, which is why very few people have one. A lot of people offer their services to help build a trading bot, but it is expensive. Metatrader even has a market place, where people can take on jobs to create a strategy for someone else MQL jobs. It was frustrating that I could only help a few, which is why we created the Trading Bot generator. With the help of the Trading Bot Generator, you can generate the code for an expert advisor in seconds. You specify the trading strategy and we generate the code for you. Try the demo and create your first trading bot or subscribe to create trading bots with over 20 indicators.

There is a possibility of data-mining bias

Data-mining bias occurs when an analyst repeatedly explores sample data until a pattern is detected. A market occurrence that may have been the product of chance or an unexpected set of circumstances may then be assigned undue significance as a result of data mining. But if you perform a good backtest this is not an issue.

Expert advisors: Are They Legal?

Expert advisors are legal, but it doesn't guarantee they're trustworthy or legitimate.

The lack of strong regulation and the abundance of scams in the market are the causes of the unease around robotics. I strongly advise you to use your own expert advisor and well-established trading software. Such as MetaTrader, which is used by millions of traders worldwide. As I’ve seen countless individuals buy an expert advisor online which proved to be a scam, and they lost all their hard-earned money online.

Few businesses marketing expert advisors have reliable software for accurately evaluating opportunity and risk. Many of them employ deceptive tactical visuals to persuade the trader that the offered robot would provide enormous returns.

Typical strategies to persuade a trader include:

  • Selecting the best backtest, also referred to as data-mining bias Backtesting is the process by which a trader evaluates the viability of a piece of software, model, or strategy using historical data. Through backtesting, a trader can mimic market conditions and see how they might have developed. Companies aiming to sell illegal robots quickly may cherry-pick one backtest from hundreds and present it to the trader as the most likely result of using the robot.
  • The word "curve fitting" is used in this business in a variety of contexts. It could mean fitting a system to the curve by altering it. If, for instance, a backtest reveals that a large loss was sustained three out of four Thursday afternoons in a month, the robot will be programmed to halt trading at noon on Thursdays, according to companies offering illegal expert advisors. The data given to the trader will therefore appear faultless when the seller executes the program again.
  • Scalping strategies can produce spectacular win rates. But they are usually trading high-risk strategies with low rewards. The risk with a scalping approach is that all profits might be lost with only one sizable loss or a few smaller losses (due to a larger trend move). If they leave the big loss out of the data it is too good to be true.
  • Using unregulated brokers - Frequently, robots with excellent performance are associated with unlicensed brokers. If you start trading using an illegal robot, likely, your spread (the price of a transaction, similar to a fee) will be much wider than those based on the results you were shown before buying, which would reduce your profits, and usually, it will lead to a loss.

Do expert advisors work?

Your expectations for the robot will have a significant impact on the response to this inquiry. In place of a human trader, expert advisors are designed to enter trade orders. The robot's inventor determines the set of mathematical procedures that will decide the trading positions the robot will take. With a good set of rules, they can be very profitable.

expert advisors can provide a solution that can trade on a trader's behalf day and night for those traders who use a wholly mechanical trading technique. The technical analysis tools that are set up with expert advisors dictate the activities that are taken. Backtesting is a technique used by the best expert advisor creators to make sure their robots maximize profits.

As was already noted, backtesting involves the programmer simulating the performance of a suggested trading strategy using historical data. Automation of this procedure is possible, but it would necessitate making changes to the robot's performance in areas like maximum drawdowns and putting stop-loss orders.

Some tips to increase your likelihood of using a expert advisor successfully:

  • Use a VPS
  • Create many trading bots
  • Perform thorough backtest analysis
  • Forward test your expert advisor
  • Determine risk tolerance
  • Make sure to regularly check in on your expert advisor

Use a VPS

An EA must be active at all times to function properly. If there are any issues with your internet connection or your computer turns off, you could lose opportunities and money. A Virtual Private Server (VPS) never goes offline, making it perfect for people who use Expert Advisors on MT4 or MT5 platforms. Metatraders offers a VPS service directly in their trading software which is great!

Create and use many trading bots

Change is constant. This applies to markets as well. If you use a lot of different expert advisors, you will diversify your trading risk and increase the likelihood of success. When the market is trending, a trend following strategy will make money and a mean reversion strategy will lose money. When the market is making small moves a trend following strategy will lose money and a mean reversion strategy will make money. If you operate several trading bots you can make money more consistently and if one expert advisor loses several others can make up for it. How many is enough? It depends, I operate 8 different trading bots. With different strategies or slight variations to diversify the risk and this works well for me.

Perform thorough backtest analysis

Backtesting is a huge factor to create a profitable trading bot. Click on the link to read more about it.

Forward test your system

Although backtesting is tremendously helpful, it can not account for all the factors that can occur in a real-world trading environment. Therefore, you should test your automated approach on the live market as soon as you are satisfied with your backtesting. You can do this using a demo account or a real account and a small sum of money.

Determine risk tolerance

Make time to draft a trading plan before you start trading forex, and then follow it religiously. Information like your level of risk tolerance and your financial objectives must be included in your plan. Once you've decided on this data, be sure to alter the settings on your expert advisor so that it operates following your preferences.

Make sure to regularly check in on your expert advisor

An expert advisor cannot take into account outside factors that have an impact on the constantly shifting forex market conditions, as was previously stated. As a result, you will need to periodically monitor the trade operations it engages in, keep up with the current state of the economy

How to create an automated Trading Strategy

You'll need a trading strategy and a trading bot to get started.

Although creating a trading strategy with a good set of trading rules is a challenge, there is a lot of literature regarding this topic. My favorite book to get started is The complete turtle trader. The great advantage of literature regarding automated strategies is that you can easily test the performance of these strategies. As opposed to trying to trade a trading guru’s strategy by hand and letting emotions cloud your judgments and impact your performance. I’ve seen so many strategies on youtube, Instagram, and TikTok that will lose you money. With the help of the Trading Bot Generator, you can recreate these strategies and evaluate their historic performance. And the performance of these strategies is usually horrible. I get a lot of new strategy ideas by reading scientific papers about automated trading. In these papers, some of the smartest people in the world have shared their automated strategies performance and trading rules in detail. You just have to pick one that is promising and with some slight alterations, you will have a strategy in no time. With some slight alterations, you might be able to make them profitable, but I do have to say that nothing is guaranteed. Read more about trading strategies

Next you can code an expert advisor within Metatrader. If you are not able to code yourself or don’t want to spend months creating one, you can use the Trading Bot Generator to create an expert advisor in seconds.

Afterwards you can start you automated trading journey!

Final thoughts

An expert advisor is a great tool to help you become a profitable trader. It will enable you to spend more time doing things you love to do. While the expert advisor builds your passive income stream. However, as you’ve learned the marketplace is full of frauds and subpar systems. Be sure to do your research. And in our opinion, it is the best and most safe option to create your own expert advisor and use a well-established platform such as Metatrader. Metatrader is used by millions of traders and is a great place to start and continue your automated trading journey.

To create an expert advisor you can code one yourself or you can use the Trading Bot Generator to generate one for you. You determine the trading rules and we generate all the hard code. We believe that creating a trading bot should be simple and available to everyone. With our help, you can create an unlimited amount of expert advisors. Try the demo and create your first expert advisor, or subscribe and get access to over 20 indicators to create an expert advisor designed to your custom trading rules.

Ready to start your automated trading journey?

  1. Register to the Trading Bot Generator
  2. Purchase a subscription to the Trading Bot Generator
  3. Sign in
  4. Watch the tutorial or follow the step by step guide
  5. Enjoy your trading robot or unlimited Tradingview indicators/strategies!

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