Can Automated Trading Be Useful?
The forex market is currently one of the world’s most popular markets as it provides traders with potentially attractive trading situations and opportunities using various trading analyses and tools.
One of the many trading tools used by experienced and professional traders is automated trading.
When using automated trading, various trading strategies and systems are translated into a program code. Programs using this code are called automated trading systems or expert advisors (EA).
What is an EA?
An expert advisor works based on preset conditions and, using various indicators, looks for entry/exit points or other strategic values, and executes trade orders as necessary (entering a position, setting a SL/TP order, etc…).
The trade orders mentioned above are often processed by the EA without human intervention, which allows traders to attend to other matters than setting various orders and constant market watching.
One of the biggest advantages of these systems is that traders don’t have to spend too much time on how to execute different trade orders on the trading platform they’re using, which can be very useful both for rookie and professional traders.
Unlike human traders, EAs don’t know about words such as “maybe”, “hopefully”, “if”, “probably”, etc. when trading.
Based on the set criteria, EAs perform analyses to make sure all information provided is relevant for the system’s future actions.
When automated trading is used on a professional level, trades are usually executed using the best, well-tested trading strategies, which are a solid base for the stability of the whole system. Automated trading makes it possible for traders to trade the market 24 hours a day, which is impossible to do when you’re entering trades manually and without an EA.
EA and rookies traders
The advantages mentioned above are great for most traders, whether rookies or experienced.
However, new traders should not rely solely on automated trading systems. It is clear that it is in the traders’ best interest to learn as much as possible about the Forex market, to watch its movements, and to gain experience and learn how to trade properly and successfully.
On the one hand, EAs are very useful, but on the other hand, they prevent traders from getting further trading education, unless they realize this themselves.
When traders lack knowledge and skills to analyze the markets and execute trades, they can’t have a clear idea of what their EA is doing and why. The markets often turn against the EA strategy for a short period time and then the EA can suffer a number of losses. Those can be rationally identified and explained when professional traders perform their own analysis, but ignorant traders won’t be capable of doing so.
That makes them stop believing the system, which leads them to look for a different, better system. However, they soon encounter the same problem.
As mentioned above, EAs seem very attractive to new traders. However, traders who use these systems should have enough trading experience, and they should, first of all, find out how the trading system of their choosing works and on which type of strategy it is based, so they are later capable of assessing whether the system works as expected or if market conditions have changed, which can lead to significant loss.
Despite the many advantages EAs bring, there are traders who want to be involved in the process of executing trades and who don’t want to put their destiny in the hands of an EA.
Some traders trade mainly based on their intuition, which can’t be translated into a program code. In such cases, traders can use a semi-automated EA. This type of system can only either enter or exit a trade, with the trader performing the opposite task.
The question is whether there is a correct trading approach which would allow for clear rules to be defined.
About the Author
Team Purple Trading
Purple Trading is a true and 100% fair ECN / STP forex broker providing direct access to the real market. High speed orders execution, no trade-offs, no limits for any type of trading, the most advanced trading technologies. Explore more about Purple Trading at www.purple-trading.com .
P.M. Purple Trading is a trade name owned and operated by L.F. Investment Limited., 11, Louki Akrita, CY-4044 Limassol, Cyprus, a licensed Cyprus Investment Firm regulated by the CySEC lic. no. 271/15.