Today's post attempts to answer a question that has become very popular lately...how to choose an expert advisor. The popularity of Forex EA's is growing by the day and we asked Nick from Forex Monster to give us a heads up on what to look for when choosing an Expert Advisor. Please feel free to ask Nick any questions in the comments, or leave a comment about your OWN experience with a Forex EA.
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If you have any interest in trading Forex, then you've no doubt come across a staggering number of Expert Advisor's also known as EA's for short or “robots” due to the way they auto trade, meaning they place the trades for you. All you do is simply turn on your computer and that's the end of your involvement.
We get emails from people everyday asking us “which Expert Advisor should I use”. This question is a complicated one to answer in one or two sentences so we thought we'd take the time to give a more detailed explanation and hopefully give some tips on to decide whats right for you.
There are basically two types of category's out there regarding Expert Advisors;
1. Scalpers – These are the most popular as they typically have a high winning percentage, often 90%+. Most people want the high hit rate and end up using them. What they often overlook is the fact that these scalpers risk big...often several hundred pips in order to gain 5-10 pips...which means that with one loss you can have a huge set back in your account or even worse...loose your entire account.
2. Day/Swing traders – There are also plenty of these to be found as well. They are targeting larger gains than the scalpers and will have a lower winning percentage usually 60-70% and they typically have a 1:1 ratio of target to stop loss.
As is usually the case, traders will gravitate to something that will give them the most amount of winning trades. But with the above info in mind we suggest that traders interested in using EA's to trade the Forex, use a combination of both the longer term strategies mixed with scalping strategies. The reason we want to blend the two together is to help offset the risk of one bad trade that the scalpers are known for. Much like a mutual fund helps diversify ones long term stock portfolio, having a mix of scalping and longer term EA's will help to decrease the chance of your account being blown up. While some scalpers have yet to have one of these large loses, there was also a time when General Motors was the largest company in North America and considered a blue chip company....now...not so much. So instead of waiting for it to happen, better to be prepared.
We must also consider the pairs in which these EA's trade. It's best to have a mix of scalping strategies that trade different pairs as well as using different day trading strategies that trade different pairs.
An extra step should also be taken with the day trading strategies as they should be broken down again into EA's that target 100+ pips and those that target 20-100 pips. This should help add an extra layer of diversity.
So if you are considering using EA's to trade the Forex market, be sure to contact the creators of the products and ask them if it's a scalper or a day/swing trader, what pairs it trades, what the stop loss and targets are. Then when building your portfolio of EA's be sure that you have different strategies working for you and not all your eggs in one basket.
Nick
Forex Monster
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Hello, everybody!
I just can't understand what are you talking about! Using EA's it's a your own business. I agree that any adviser will lose anyway BUT! if you move your profit at list every week. Adviser can be profitable for you 😉
I think what makes most people disappointed when it comes to EA's is the “make 100k starting with 10 dollars in just 2 weeks” type statements....this wipes any credibility the product may have.
I've found that most EA's need to be traded with a little common sense added to them....let it make it's entry and then monitor it and apply some basic support and resistance methods. It takes some real effort to weed through and find the strategies that you can trade like this, but it's worth it.
As a relatively new trader I have tried several of these "get-rich-quick" schemes. There is a similar theme to all of the claims, but I haven't had much success. I have had more success reading good books, following the educational info on this site, and trying to develop my own ideas.It's trial and error, and keeping the positions small so I don't lose my shirt before I get a handle on it. it's the psychology that I have to deal with the most - keeping my head straight, both when winning and losing. Keep up the good work, there is some great stuff on your site - it's rational and objective. The rest is up to me
Use your own head people. Does the robot really work for 99.95? The logic is very simple. They curve fit a robot to work, but in time it will lose everything it gained. If not, then it needs constant adjustment and thus your time which equals to you being a normal analyst without the robot.
I have programmed these robots and none of them work all the time. You can download free robots from forex forums. If you truly wish to make money, you make your own robot for gullible people. That's just my opinion. The MarketClub has one of the best signaling systems I know. Best of all it's very simple!
Bill, if it's hard to believe, then it's probably a scam. I can tell you from my own experience with EAs that most of them are fitted (automatically optimized to the price action) to the price history and not actual forward testing and most of them will lose money in the longer run. I have created many EAs myself but there is no finding the holy grail of trading. Some EA supporters claim that there is no bad EAs on the markets, but just bad times when to run them. In the sense that you should check the market conditions and determine which EA to use. I think there might be some "multi-strategy" ones out there which determine which strategy to use and not just use a single one. Some sources claim that over 50% of trading is already being made by programs, so it seems to work for some parties..
But the bottom line is, ask yourself: If it REALLY works - why would someone give away a bottomless bag of money? Altruism? Yeah, right.
Gert
I notice they ask a very small price for something that is capable of making somone so much money…its hard to believe?
Probably becuase it is not true!! I think the saying is "if it sounds to good to be true, then it probably is".
Hi Bill,
Sorry to inform you that any of the robots you are hearing about are not accurate even 60%, you need to modify some parameters accordingly and each robot is created for a certain currency trade not for all currencies.
I had very bad experience with robots and I suggest taking and completing the cource and getting training trades before you go with real money.
Good luck
Dan
Bill,
Their are many companies that want to sell you a program but never stand behind it because the currencies are heavly traded , one mistake can cost you big. From my experiece marketclub offers a great tool to use as you build your portifilo, everything is not iron clad but use it with your abilities and make it work you for. No one can give us the right trade position at all it's understanding market conditions and trends which are crazy. Adam makes alot of great recommendation but all don't work. Understanding this market is extemely difficult. Nothing is guanrenteed. Which you best of luck.
wayne
Bill,
I think you are referring to Fapturbo...it's one of, if not the most popular scalper being sold...and like anything you will hear people who dislike it and those who love it.
I use both Fapturbo and Forex Monster...as well as others in a portfolio of EA's.
I use several, for the same reason someone owns different stocks in different sectors..to spread out the risk. Not enough talk takes place about the downside when discussing the use of EA's...most just discuss the winners...and forget about how they got that winning trade...every EA/strategy will have it's downside or Achilles heel. It's important to protect against that if you are truly interested in protecting and growing capital.
As far as the large sums of money goes, yes they can make a lot, and the Forex market is highly leveraged so while your gains are amplified...so too are the losses. But if you are smart and start small and grow, there is a place for EA's for a portion of your risk capital.
And Jono yes I also enjoy the high winning percentage of the scalpers. 🙂
Nick
Hi,
First of all I want to tell you how much I have appreciated using your site...to check stocks in my portfolio, etc. (I lost nearly all the value of my stocks last year!)
I have been wanting to trad currencies for some time and have looked at many of the "robots" offered on the market. I have also read many reviews about them. I recentley looked at one called Fatbro, I think its called. They make some big claims???? I don't know who to believe? I wanted to ask you if you have tried this "robot" that you are refferring to called "Forex Monster"???? I notice they ask a very small price for something that is capable of making somone so much money...its hard to believe? I would appreciate your feedback on this.
Sincerly,
Bill Newell
Scalping all the way to the bank!
Jono