- What is an Expert Advisor (EA)?
- How does Forex Expert Advisor work?
- Trading System: Steps of building of systems
What is an Expert Advisor (EA)?
Expert Advisor is a mechanical trading system based on the MQL-4 programming language.
Platform MetaTrader 4 was developed with the possibility of automated trading.
MT4 terminal can be set to alert you about the possibility of shopping opportunities, as well as to trade on the account for you; to send orders directly to the broker or to control the Stop loss and Take Profit levels.
Automated Trading eliminates psychological dilemma
There are many Expert Advisors and they all are different and unique, on their properties of entry and exit of the market.
The advisors provide a different approach for trading on the Forex market, as they help to avoid erroneous decisions based on emotions.
Advisors in MT4 allow applying a balanced approach and are designed to assess the many factors that can help the trader to make more informed decisions.
All technical indicators that are available in the MetaTrader 4, can be analyzed logically.
You can also test and create your own technical indicators, using the instruments of MetaTrader.
Types of Expert Advisers
There are several types of MT4 Advisors available for the various strategies.
Some Expert Advisors are configured to analyze news and events, while others are intended to remain active for 24 hours a day.
Experienced traders, who have already developed their own Forex trading strategy, can refer to the MQL- 4 programmers with the purpose to automate the system.
Running EAs on MT4 and MT5
To operate the automatic Expert Advisor, it must be attached to a separate chart on the platform MetaTrader 4.
Advisor MT4 can consider dozens of factors simultaneously, for a decision to perform the next deal.
This is a useful quality since person can’t take into account many factors at once.
How does Forex Expert Advisor work?
Expert Advisors are intended for the evaluation of various indicators and taking measures, when market conditions meet the necessary parameters described in the source code of the Expert Advisor.
As an example, a simple version of the Advisor may contain something like this:
“If 9 and 20-day Moving Average will cross with the 9-day Moving Average above 20 MA and above 50 RSI, then open the long position (BUY)”
Of course, there are countless conditions which the MT4 Advisor can use for an entry or exit from the market, as well as to control the stop level and many levels of profit.
MT4’s Expert Advisor is usually divided into three parts: the start or function “initialization”, the main function and “deinitialization”, or cleanup function.
The Advisor will be started through its autostart function immediately after launching and will work through its cleanup function at the end.
At the same time, Advisor program MT-4 passes through the loop of its main function over and over again with each incoming tick, while it is attached to a chart and active.
How to use the Expert Advisor?
To use the Advisor must install MetaTrader 4 and then attach it to the appropriate schedule in MT4.
If with an Advisor were enclosed the instructions, they should be read completely.
Types of trading Advisors
There are different types of Advisors for the MetaTrader 4 platform.
The list below is not final. There may be other types of Advisors, based on the creative abilities of programmers who make them.
News Advisor is a type of expert advisor intended for trading on economic news and large price movements that may arise during the release of financial news.
Breakout Advisor is designed to open positions when the price breaks through predefined levels of support and resistance.
Hedge Advisor is any expert advisor that trades two separate and opposite positions.
Trading System: Steps of building of systems
The term “trading system” is usually understood as a set of rules based on which a system trader performs trading operations.
Here, the principle “The more complex the better” does not work.
As one of the renowned traders said: “A good system should fit on the back of a postage stamp.” Most often, a simpler way turns out to be the most appropriate and effective both for understanding and application.
Certain signals of indicative technical analysis or models (patterns) of graphical analysis can act as basic trading rules.
The general rule for the construction of trading systems is sufficiency of number of such rules.
Studies have shown that the optimal trading system consists of 3-5 of rules describing opening and closing of positions.
If less than 3 rules are used in the trading system it often does not take into account such important things as monitoring of trend and its strength.
But too many rules can be more dangerous, especially if they belong to different classes and categories.
In the end, such confusion of signals can mislead even an experienced trader.
Generally, using in the system of more than 5-6 rules is as ineffective, as using of 3 rules.
In principle, the selected rules must help the trader in dealing with the following issues:
- Determine the presence, direction and strength of the trend, and as a result, the direction of the opening position;
- Determine the rules for opening positions, that is, the rules when and where and under what conditions entry into the market will be made;
- Define rules of closing positions, that is, the rules when and where and under what conditions exit and profit taking will be made;
- Determine the rules of position closing with a loss (setting stop loss), if the scenario does not go to the open position;
- Determine the rules of capital management, that is, which volume (the size of trading positions) the trader will trade;
Before a trader starts assembling a group of rules in the system, it is necessary to determine three important parameters:
- What will be the main timeframe for trade;
- What will be the chosen trading strategy;
- What will be the chosen type of the system