What Are Expert Advisors (EAs) in Forex Trading – And Should You Use One?

If you’re new to the scene, forex trading can feel pretty intimidating. Understanding how the market moves, where it might be going and what decisions you should take can fray the nerves.

However, if you’re lucky, you might get a bit of help from a friendly robot, also known as an Expert Advisor (EA). Expert Advisors are programmes that can take trading decisions on your behalf. For traders they can make life less stressful and open up opportunities which might have been missed.

How an Expert Advisor Works

In the digital world, more and more of the trading process is becoming automated. Robots are taking the lead and helping traders make decisions. This is what an expert advisor does. It is a programme which can be designed to either suggest when to make a trade or do it for you automatically. You can install it into the forex platform MT4 (or MT5) and it connects with your broker.

If you’re new to forex, it’s like having your own little expert working with you and making all the trades on your behalf.

Here at Trade Stocks & Forex we regularly test out Expert Advisors to see if they work as well as claimed and can deliver a consistent profit. Check out our reviews of all systems we’re currently testing (including EAs) here. 

Why use one?

One of the most challenging aspects of forex trading is the fact that you are responsible for making the decisions. Even experienced experts wrestle with these choices, so for newbies it can be overwhelming with so many tools, charts and indicators to follow.

Handing things over to an expert advisor, therefore, has a range of psychological and practical benefits.

1. It’s a lot less stressful: Making all these decisions and agonising over the outcome can be mentally exhausting. This allows you to hand over responsibilities so you don’t have to worry about it. If a trade does not work out as well as you hoped, you won’t be left thinking back over your decisions and missed opportunities.
2. It saves time and effort: Analysing the market, setting your strategy and making decisions can be immensely time consuming and stressful. If you’re trading forex alongside another career, this can free up time for other things.
3. Always on: The world of Forex never sleeps and EAs can keep going 24 hours, seven days a week. It can make trades when you’re not around meaning you can take advantage of any opportunities which crop up while you’re asleep, at work or out and about.
4. Enhanced analytics: As technology becomes more sophisticated, trading robots are becoming more effective. They can process more data, view markets and should be able to identify patterns and trends which you might miss. However, this level of functionality depends on the sophistication of the EA you’re using.

Robots also lack some of the peculiarities of human traders which can hinder their performance. Emotions and pre set biases can play havoc with trading strategies. If you’ve had a good run, for example, your strategy may become too aggressive and miss obvious warning signs. Equally, if they suffer a series of setbacks traders can often retreat into their shells and miss opportunities.

Disadvantages of EAs

Whilst there are some advantages to using an Expert Advisor, there are clearly also some potential disadvantages. These include:-

1. That lack of human involvement: this can sometimes be a drawback and is one of the biggest criticisms of robotic trading systems. They lack the experience and human intuition which help experienced traders predict the market. As you gain experience and confidence, you may find that you can start to outperform the robots.
2. Performance also varies widely between different EA systems. The EA must have the capacity to monitor breaking news and respond in real time. It will also have to be programmed to understand the news and what impact it might have on trades. If it can’t, it may miss important information which could determine whether or not a trade is worthwhile.
3. Any automatic trading system will also only be as good as the programming it’s been given. AI in other areas of finance has been shown to inherit the prejudices of its programmers. For example, a facial recognition programme in the US showed a high degree of accuracy in determining gender for white men. However, for other ethnicities the accuracy rate dropped to around 30%. As it had been programmed by white men, its abilities were strictly limited by race and gender.
4. Rigidity: EAs will only work on their preset rules and these can be rigid, inflexible and miss some glaring opportunities. Humans may be emotional, they may be prone to stress and their decision-making is not perfect, but we will be able to think outside of those parameters and spot opportunities the computers might miss.

This is also a ripe area for cyber criminals. When you use an EA, you’re placing a huge amount of trust in that algorithm. If its authors can’t be trusted, your money will be in danger. Red flags include those EAs which promise stellar returns. When something sounds too good to be true, it normally is.

Equally, though, many criminals know people are wary of over-promising, so even a system which appears to offer moderate and realistic growth may warrant caution.

This is where we come in however. By putting EAs through their paces in a live trial here on the site, we test whether EAs can live up to their billing and the results claimed on their sales pages. You can check out current trials here.

Conclusion – The Future is AI

We’re a long way from the idea of true AI, even though technology is advancing at a breakneck pace and it is clearly becoming a bigger part of our future. Whether you’re developing your own EA or using one of the many available, it’s important to perform basic research and follow a site like this one that puts EAs under live test conditions for an extensive period and records their results.

There are some great EAs out there which achieve year-on-year gains. Equally there are some which are not so good and a few which are downright untrustworthy. Fortunately, here at Trade Stocks and Forex we do all the hard work for you – finding the best ones whilst identifying those that don’t work, so you don’t have to spend countless hours searching yourself or risk your hard-earned cash on EAs that are useless.

So take a look at our list of Winning Systems and check out those that have passed our rigorous testing process.

The contents of this website are intended for educational and information purposes only and do not constitute any form of advice or recommendation and are not intended to be relied upon by you in making (or refraining to make) any specific investment or other decisions. Appropriate expert independent advice should be obtained before making any such decision. We cannot and do not offer individual investment advice.