What is automated trading? Automated trading can also be known as expert advisors (EA’s), or Robots. EA’s are most commonly thought of as a system that once turned on will open and close trades by itself and make a fortune in the currency market. Ideally, the EA would work 24/7 and require little or no trading knowledge to run it. The idea is exciting but the EA’s that do all of the work usually only work part of the time. At least in all my years of Forex market experience, I have not seen or heard of an EA that works all the time if it is making all the trading decisions.
Allow me to explain: EA’s are written to work when the market is moving in a certain way. When the market is moving the way the EA is written then it can make some money. Here is the problem: The market does not always move in the same way! When the market changes then the EA will start to lose on the trades and in many cases wipe out the trading account... Not such a good thought huh?
There are EA’s that are written for when the market is trending; others are written when the market is in a channel, and still others work on break out situations. For them to work, a person would need to be awake all the time and turn the EA on or off depending on which way the market is moving. If that is the case the trader would need to be a good trader to be able to determine what the market is going to do. This defeats the purpose of a fully automated trading system.
Am I totally against using an EA? No. There are a few types of EA’s that work and by no means have I seen all the EA’s because there are thousands of them. So which ones work? The EA’s I see that work or those that require you to be involved in the process. For example, an EA that will find a closing point once you turn it on at the appropriate time. This requires that you know how to trade and when to set the EA so you do not have to be in front of the computer to close the trade or set a take profit for your best guess as to where the best place is to close a trade. The EA can be set to close the trade when the market indicates that it is changing directions.
Another example is an EA that will alert you when the market is setting up to make some kind of a move. The trader will still have to make the decision to take the trade or not. The main advantage of this type of EA is that a trader does not have to always be in front of the computer. More currencies and time frames can be monitored at one time with less effort.
In summary the only EA’s I have seen that work are those where the trader has to be involved in part of the trading process.