Automated Trading

Most traders do a lot of market analysis for their trading. There are two analysis methods: Fundamental Analysis and Technical Analysis. In Fundamental Analysis, traders must read and understand charts, pairs characteristic, news events, etc. In Technical Analysis, traders’ decisions purely based on certain price level or indicators such as MACD, RSI, Bollinger Bands,etc.

If the trading strategy is based only on simple rules using indicator values, then that strategy can be programmed, and the trade can let the Expert Advisor does the automated trading. It will be nice if we can run an automated trading machine to make money from Currency Market. Expert Advisor (EA) is a script in a specific programming language (MetaEditor) that will place trades within MetaTrader4 automatically. This can be useful since not everybody can sit in front of monitor 24 hours a day. EA has advantages and disadvantages.

EA advantages are:

  1. Can run trades 24 hours

  2. Can not feel tired

  3. Trade without emotion

  4. EA can manage few currency pairs simultaneously. This can increase trading frequency.

  5. Fast trade executions. This advantage depends on internet connection.

EA disadvantages are:

  1. Not everybody familiar with programming language

  2. Manual intervention can lead to EA misfunction

  3. During volatile events, EA might not work properly (depends on how it was programmed)

  4. EA can not recognize market changing behavior

  5. If the EA has a bug then it could lead to a wrong trade and resulting in a loss of money.

Think carefully before you run an EA run on a live account. Make sure it is well tested and keep a careful eye on what it does. To prevent from losing too much money because the EA doesn’t work as expected, don’t keep too much money the real account.

Using EA in trading is very helpful and can get rid a lot of hassles. However, keep in mind that it is only a program and needs to be supervise. The best way to use EA is to run it as a ‘grey box’ not as a ‘black box’. ‘Grey Box’ means trade with an EA and do intervene if something does not go as planned. It is necessary for a trader to constantly watch the trades and how the EA reacts towards the taken trades. ‘Black Box’ means the EA does all the trade without trader’s intervene.

About Vilas Kusumahardja

Originally from Indonesia, Vilas began trading ten years ago to support his love of travel. He figured that, as long as he could find an internet connection, he would be able to support himself. In 2008, he came to the United States and a year later, re-learned everything he thought he knew about forex. Now, he places trades using support and resistance, utilizing signals from EA's. Vilas helps at the Apiary Fund as a trader support representative managing the Apiary Fund blog and answering questions in the forum.

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