Many people’s understanding of foreign exchange EA is an intelligent trading program that can realize automatic order opening and closing operations. It is a machine that can make money automatically, so I have a deep yearning for foreign exchange EA, thinking that finding a unique foreign exchange EA can achieve long-term and stable profits, and even make money lying down! Is Forex EA so magical? How should we get to know EA?

Forex trading is not always smooth sailing and sometimes even frustrating. Some foreign exchange traders may be emotionally influenced by trading and tend to make wrong decisions, which may have a negative impact on their accounts. One way to avoid the above problems is to use Expert Advisors.

At present, there are many EA intelligent trading software in the foreign exchange market, most of which are based on various technical indicators combined with historical data to set trading procedures. Most of the EA transactions are mature trading models that can carry out programmatic transactions. As an automatic trading system, it will automatically open and close transactions according to preset rules.

At present, in major domestic and foreign markets, some professional traders are keen to choose Expert Advisors to enter the foreign exchange market.

  1. What is Expert Advisor

As mentioned earlier, EA is an automated foreign exchange trading system. It is to use a special programming language (MQL) to write your own or others’ foreign exchange trading strategy into a computer software program (Expert Advisor), let the computer automatically buy and trade for you according to your pre-set conditions.

EA can not only automatically generate trading signals and notify you of trading opportunities, but also can trade according to different rules. Like any automated software, they reduce the chance of making emotional and irrational trading decisions.

Generally speaking, traders can easily obtain Expert Advisors via the Internet (usually at a fee), and can quickly install them into your trading platform without any special technical knowledge.

Second, the six categories of EA

  1. Currency related categories:
    Trading through the correlation of different currencies, the biggest disadvantage of this type of EA is that it cannot be backtested. You cannot know its simulated performance. You can only observe its performance by observing the actual operation.
  2. Trend category:
    The most common and most mature type, trend type.

The most mainstream EA type generally performs entry and exit operations based on various indicators and strategies.

  1. Neural network:
    This type of EA has just been developed recently. The so-called neural network, to put it bluntly, is to simulate the thinking process of the brain and continuously learn historical trends. Therefore, this type of EA cannot actually perform historical backtesting because it has learned it in its “brain”.

This type of EA is a new breed, and it remains to be seen whether it can make stable profits.

  1. Grid category:
    The characteristics of the network category are generally very obvious, that is, there are many orders, and the floating losses are very large, and the orders are all take profit. The advantages are obvious: the capital curve is abnormally smooth, and the profit is very stable.

But the shortcomings are also extremely obvious: a big trend can make you liquidate, and months of profit plus principal can disappear in a few days. However, for large funds, it is safer to use very small positions. In addition, with the strategy of regular withdrawals, it is also a less risky way.

  1. Scalping:
    This type of EA should be said to be the least risky and profitable EA, and its trading time is generally only a few seconds. However, its requirements for platform spreads and delays are also extremely high, and because of its exceptionally excellent performance, it will attract a large number of people to use it in a short period of time, causing Broker’s attention, and some other reasons. Such EAs can often only achieve short Excessive profits in time cannot make long-term stable profits.
  2. Comprehensive category:
    In fact, many EAs are comprehensive. Although some EAs enter the market on a trend, they have adopted extremely aggressive fund management, which amplifies the risk of liquidation. Some grid-type EAs use Martingale-like fund management (Martingale method, similar to adversity plus position), abandon the market-neutral entry strategy, and instead use some indicators to judge entry.

Expert Advisor

Three, the function of EA

Excellent Expert Advisors can be programmed to work in a variety of ways (for example, using a series of technical indicators, such as moving average indicators, or MACD-moving average convergence/divergence indicator), or search for necessary trends and breakthroughs. By applying these different indicators, the EA can analyze the market and the performance of individual financial products, and generate signals about trading opportunities.

Certain Expert Advisors are designed to control your account. This also means that it will look at your current account balance and then determine whether your account balance is at risk. The general rule of thumb is to only take 1-2% of your account balance to bear the risk. In addition, it can review the transaction and decide whether it should set a trailing stop loss. Once the EA has the necessary information, it will also consider the main market conditions to inform you when to open a position.

Four, commonly used foreign exchange EA trading strategies

Experienced people will always focus on trading strategies, because this is the core of Expert Advisors. From the perspective of trading mechanism, programmatic trading can be based on predictive models as trading criteria, or on the basis of technical analysis models.

  1. Homeopathic trading model (moving average method)
    As the name suggests, the main application market for homeopathic trading models is the trend market. Its trading principle is to follow the trend after discovering the trend, chasing the rise and killing the fall. The technical indicators it uses include MACD and MA. Buy when the 15-day moving average breaks through the 26-day moving average from bottom to top, and hold it until there is no short signal. When the 15-day moving average breaks through the 26-day moving average from top to bottom, it is sold, and the long position is closed and shorted at the same time, holding it before there is a short signal.

The disadvantage of the homeopathic programmatic trading model is that the moving average is very easy to send wrong signals in the midway adjustment phase or partial rebound and retracement after the consolidation or trend formation.

  1. Contrarian trading model (golden section point)
    Contrarian trading models are mainly used in volatile markets. Its trading principle is to sell high and buy low in the volatile range. When the trend is not clear, find a relatively low point and conduct reverse trading on cakes. The technical indicator it uses is the golden ratio point. It is based on the golden ratio of 0.382 to buy, 0.618 to sell, or the difference between 0.191-0.382. The disadvantage of the contrarian trading model is that when the market changes trending, this method will no longer be profitable.
  2. Morphological trading model
    Commonly used morphological trading models include gap method, wave method and rising flag method. After the pattern appears, it will trade according to the pattern and the target position after the breakthrough. The available pattern signals are: reversal pattern, continuous pattern, gap and wave pattern, etc.

Five, matters needing attention before starting EA

In addition to using the foreign exchange EA trading program generator (in this tool, you can enter the parameters of your preferred transaction, the tool will generate the EA program for you), if you want to create and use your own EA, the following will mention some useful Tips for it to work properly.

  1. The importance of data
    The first trick is to pay attention to the reliability of the backtest results. You may think that the excellent backtest results prove that your system is ready for success-but unfortunately, it is not that simple.

These results depend on the quality of the data applied in the backtest, which means that poor data may lead to unreliable results. The default data in MT4 and MT5 can only achieve up to 90% modeling quality. Although this looks good, it can make a considerable difference in backtesting and live experience, especially in a smaller time frame.

  1. Know your execution speed
    Reliable data is the first step in adjusting the EA to trade real-time accounts. The next step is to understand your execution speed. MT4 and MT5 require trading activities to last more than 30 seconds, which is called a trading session.

For example, if you use a free Expert Advisor during your meeting, if there is no activity for more than the above time, it will automatically time out, which requires the use of password and login to automatically re-verify the IP address. For some traders, this may take some time, even as long as two seconds. Even if it may seem trivial, a delay of this magnitude can have a significant impact on your trading results during periods of high volatility.

  1. Debug
    If you spend a lot of time writing complex EA programs in MT4, then you may know how difficult it is to debug code. Since MetaQuotes strategies show that they better meet the needs of brokers rather than traders, you will find that debuggers are not included in the list of available tools-whether your EA is free or paid, it doesn’t matter.

Fortunately, there are features that can make your program more precise. One way is to enter specific functions directly into the code. In addition, you can also download Microsoft DebugView to view the system formatted log.

  1. Test your MetaTrader connection
    The last tip about the EA is as follows-make sure to test your MetaTrader connection. Your platform must be opened and connected directly to the agent to run the EA. There is nothing more disappointing than thinking that you have an EA and discovering that it has been disconnected and cannot be reconnected.

Although MT4 and MT5 are designed to automatically reconnect to the server without any problems, this does not always work as expected. If you have multiple MetaTrader accounts, the best solution is to delete unapplied accounts from the Navigator window of MT4/MT5.

How does EA trading bring profit

Experienced people will always focus on trading strategies, because this is the core of Expert Advisors. From the perspective of trading mechanism, programmatic trading can be based on predictive models as trading criteria, or on the basis of technical analysis models.

  1. Homeopathic trading model (moving average method)
    As the name suggests, the main application market for homeopathic trading models is the trend market. Its trading principle is to follow the trend after discovering the trend, chasing the rise and killing the fall. The technical indicators it uses include MACD and MA. Buy when the 15-day moving average breaks through the 26-day moving average from bottom to top, and hold it until there is no short signal. When the 15-day moving average breaks through the 26-day moving average from top to bottom, it is sold, and the long position is closed and shorted at the same time, holding it before there is a short signal.

The disadvantage of the homeopathic programmatic trading model is that the moving average is very easy to send wrong signals in the midway adjustment phase or partial rebound and retracement after the consolidation or trend formation.

  1. Contrarian trading model (golden section point)
    The contrarian trading model is mainly used in shock markets. Its trading principle is to sell high and buy low in the shock range. When the trend is not clear, find relatively low and high points for reverse trading. The technical indicator it uses is the golden ratio point. It is based on the golden ratio of 0.382 to buy, 0.618 to sell, or the difference between 0.191-0.382. The disadvantage of the contrarian trading model is that when the market changes trending, this method will no longer be profitable.
  2. Morphological trading model
    Commonly used morphological trading models include gap method, wave method and rising flag method. After the pattern appears, it will trade according to the pattern and the target position after the breakthrough. The available pattern signals are: reversal pattern, continuous pattern, gap and wave pattern, etc.