The forex market is increasingly expanding at a rapid pace with millions of active traders executing trades daily. The use of advanced technology is also preferred among traders who are involved in active trading. As automation is slowly taking over most industries and businesses, the forex market is also noticing a rise in the use of FX expert advisors to execute a trade on behalf of an investor.
But even with the tons of perks that these FX EAs are capable of, you must consider certain factors before investing in one.
But before we jump into discussing the factors that indicate an EA’s reliability, let us get a clear understanding of what forex EAs are and how they work.
Explaining FX Expert Advisors
An EA is a software program that offers the benefit of automated trading to investors worldwide. A forex EA is responsible for identifying the best possible timings for opening a position with the help of certain in-built algorithms and indicators. As the market is active for 24-hours straight, using an EA will certainly be useful; it is immune to any emotional factors and can facilitate you to make high-profitable trades by identifying the ideal entry points.
Developed in MQL, an EA can operate on MetaTrader 4 or 5 and comes up with complex strategies of trading based on a certain mathematical pattern. The ways expert advisors tend to outperform manual trading practices involve their high-accuracy results along with faster data-processing technology which aids in better analysis.
Although being quite similar and often mistaken as the same, a forex EA slightly differs from a forex robot in terms of its functions. While forex robots can take care of executing a trade on behalf of you, and EA will simply advise you when to initiate a trade allowing you to have full control over initiating a trade.
Points to consider before investing in an EA
Investing in an expert advisor requires certain factors to keep in mind that will help you to maximize your success rate with the benefit of automation.
- Performing a thorough background check
The security factor should be on your priority list while opting for an expert advisor. Thorough research along with a complete background assessment is necessary to determine the authenticity of the EA. You can rely on reviews and testimonials of other users as well as checking the credentials of the vendor. Some factors that decide the genuineness of the EA include secure payment options, refund guarantees in case of false claims, transparent business practices, and development by trustworthy programmers.
- Conduct satisfactory research
It is common to come across many catchy claims of instant and guaranteed profit while opting for an EA. But these commercials fail to mention that expertise is the most critical asset you will need to succeed in this industry. You can immediately notice risk factors when anyone makes exaggerated and unreasonable statements if you have a good understanding of how the foreign exchange market works. While many appropriate automated trading systems are useful in leveraging your trading career, you may also come across many fraudulent scenarios in this industry. Thus only proper learning will provide you with the information you need to prevent being a target of these frauds.
- Get familiar with basic EA stats
Reliable expert advisors are generally introduced to the market after a long process of backtesting performed by the developers. While selecting an EA you will most likely come on certain statistics including the profit factor, drawdown and expected payoff that demonstrate its performance. As an investor, you need to be knowledgeable about these stats, what they mean and how they can impact your trading style before finalizing an EA.
- Perform independent testing
The final step will always be to verify the capabilities of an expert advisor along with checking the backtested results. You can rely on a demo account or a trial version of that EA easily before making the final call.
Selecting the ideal forex EA can be challenging irrespective of the level of experience you have in this. However, following these tips as well as your experience can make this process easier and worthwhile.