Forex robots and Expert Advisors are scripts that code with automated forex trading strategies. The primary way to use automated software is to import these scripts into a forex platform such as the well-respected MetaTrader platform. A substantial number of robots and EAs develop using the Metaquote MQL language for deployment on both MetaTrader 4 (MT4) and MetaTrader 5 (MT5).
Once imported into the trading platform, the automated software can perform trading operations, some with minimum trader intervention according to the algorithm’s pre-set conditions.
The difference between forex robots and Expert Advisors
Forex Robots and Expert Advisors are both very similar types of automated trading software. Both are involved in the analytical part of a trade. Both analyze current market prices using their internal algorithms and technical indicators to find entry points for high probability trades.
There is one crucial difference. A forex robot will perform trades without the need for manual sign off. An Expert Advisor is just responsible for generating trading signals, advising you if they think you should trade but not placing a trade for you.
A forex robot undertakes the whole process from identification to trading placement automatically with no trader intervention.
The main features of Expert Advisors and forex robots
The algorithmic trading programs coded into EAs and robots are often capable of performing varying functions. Except for automatic trade placement, which is limited to forex robots, they both share the following functionality:
- Alerting the trader about market events
- Risk control via pre-settled money management policies
- Monitoring the compliance of a strategy concerning market conditions
- Placement of a trade order according to specific conditions
- Opening, closing or partial close of market orders according to the algorithm
The advantages of forex robots
A forex robot will automatically enter and exit trades during a specified period if that is part of its programming. It means a trader does not have to be present to manage the trade placements. It could allow 24-hour trading at high volume, which is not possible for a human being. It reduces the chance of missed trading opportunities that a human trader may encounter due to physically being unable to trade.
The only downside is always having to leave your computer on. The other alternative is to have your forex robot hosted on your virtual private server. Many traders chose to use forex robots as their sole method of trading, while others will use it as part of a broader overall strategy.
Forex Robots serve another useful purpose. They allow traders to trade without emotion. Even disciplined traders working within a robust trading system can be susceptible to placing trades that may not be in line with strategy rules. Times of high volatility or chasing a loss can see traders who place manual trades that do not follow the logic, resulting in trading losses. Automation removes psychology from trading with a focus just on following a strategy.
Forex Robots work best with a single currency pair and in markets that are trading in a narrow range. Volatile markets with large ranges see more mixed results.
Backtesting automated trading software
To get an insight into how well an automated forex trading system works depends on the strategy employed. It is critical to undertake a backtest of the robot software and have a robust money management system in place from the onset.
Backtesting is essential for getting a better idea of the robot’s performance, including risk versus reward and other such variables and indicators.
However, good your strategy, without backtesting and money management in place, you will fail. Get it right from the beginning.
Final thoughts and conclusion
If you want to use automated software but still want to maintain control and a more hands-on approach to forex trading, using an EA as part of a trading system is a logical step. If you wish to full automation as part of an algorithmic strategy that requires constant trade execution
There is a multitude of forex robots available on the market, particularly compatible with the MetaTrader platform. For more reviews and research on forex robots and Expert Advisors, please visit our review section.