Auto trading Forex – How to choose an EA?

For traders who prefer to make use of a mechanical trading system, opting for an expert advisor is the obvious choice. However, taking a look around, a trader …

For traders who prefer to make use of a mechanical trading system, opting for an expert advisor is the obvious choice. However, taking a look around, a trader is bound to get confused given the sheer variations and different types of expert advisors that are available in the market. So how does a trader who wants to auto trading forex go about picking the right EA for them? Read this article to learn more.

Have a strategy in place

Do you prefer or trust a trend following system or a sideways trading system? This question might seem very simple but forms an important basis towards finding the right expert advisor. Most traders tend to make the mistake of directly looking at an EA’s price and its backtesting statistics rather than focus on the basic question at hand. A trend following EA tends to work differently compared to an EA that merely trades the sideways markets. It is often said that prices tend to trade sideways more often than trend depending on the time frame you are looking at. Therefore, it is not hard to see the differences that arise when asking this question which will help traders find an optimal expert advisor for their trading.

Time frame

The next obvious question is to figure out which time frame is the EA built off or optimized to. Most traders, once they purchase an expert advisor tend to apply the EA to different time frames in a hope to improve the odds of winning. Using an EA to a different time frame than what is built for merely renders the EA useless and could potentially harm your trading equity when you begin to auto trade the forex market. The time frame factor is important for the fact that when using an auto trading forex software, you might have to make an additional investment into using a VPS so your strategy works round the clock. However, these additional costs can be reduced, if for example you prefer to use an auto trading software that works simply during the peak market hours.

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Money management

EA’s are well configured now a days that traders can choose their own money management strategy. Whether it be a 1% rule or simply taking a fixed stop loss and take profit levels. Other factor to bear in mind is the fact that traders should pay attention to the number of trades the automated trading software allows for. While it is simply possible to apply the 1% rule to a trade, if the EA starts trading multiple orders then it becomes risky to manage and could potentially result in a margin call.

Forward testing is always better

Traders often look at the backtesting results before purchasing their auto trading software. However, it is more advisable to purchase an EA which has been forward tested in the markets. There is a reason why they say that past performance is not a guarantee for future results and this is essentially true when looking for a trading strategy. Interestingly enough, most of the EA’s that are available now a day’s often lack proper forward testing history. It isn’t surprising therefore how many of the highly acclaimed EA’s tend to fail when applied to the markets.

While auto trading is widely claimed to be the next step up in the world of retail trading, traders need to be cautious into how they choose and invest in an Expert advisor, nothing different from experimenting with a manual trading strategy. Asking the right questions and making a logical decision than an emotional one can help traders to potentially save up money while ensuring that they make use of a forex auto trading strategy that suits their pocket and trading goals.


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