What’s best: Forex robots or trading strategies?

06.10.2020

Feature articles

Regular winners of Grand Capital contests sometimes honestly admit to the use of Forex robots. Meanwhile, many participants use contests to test their trading strategies and will never trust an automated advisor. Let’s figure out which trading method brings more profit and has fewer risks.

Forex advisor or a robot is a piece of software for automated trading, which includes the analysis of market conditions based on a given strategy, entering and exiting the market, setting the position size and the limit orders with no actions required on the trader’s part.

Expert advisors can be divided according to:

  • the type of the strategy used;
  • the quality of the code;
  • the profit/risk ratio;
  • accessibility (paid/free).

Automated trading with advisors is available both in MetaTrader 4 and MetaTrader 5.

Forex robots or self trading?

Automated trading can bring profit, but it also has weaknesses. 

Key advantages of Forex advisors: 

  • acts strictly within a given algorithm;
  • not influenced by emotional factors;
  • human error is out of the picture;
  • operates 24/7.

 

Disadvantages of trading robots:

  • uses only technical analysis elements, more precisely, indicator signals;
  • MQL (programming language) skills are required to create your own trading robot;
  • historical data on profit doesn’t guarantee the same result in the future.

 

All these pros and cons are relative, of course, but there is a fundamental difference between the automated and self trading: the human factor.

The robot decides to open or close a trade only when certain signals determined by the trading strategy appear. In case of a non-standard situation, it will continue within the logic embedded in it.

At the same time, the advisor is not able to assess the fundamental analysis factors, as a trader would do before deciding to enter the market. But the program will never make a mistake unlike beginners who often open positions of the wrong size or direction.

The expert advisor will never get tired and can trade around the clock. However, its trading activity can both generate profit and lead to losses. A series of failures would stop the trader, but the robot will be trading until it runs out of money or until the trader turns it off manually.

A trader’s profit is determined by their knowledge, practical skills, adherence to the rules of money management, and self-control. Profit made by an advisor is depends on the strategy it’s based on, the quality of the code, and its settings.

Difference between advisors and indicators

 A trading indicator is a software program based on the visual interpretation of historical data. It examines the selected parameters of a currency pair within a certain time interval (market volatility, volumes, etc.) and, depending on its type, displays it as lines, bars, and other objects.

Several Forex indicators taken together make up a Forex strategy. A certain combination of their readings is a signal to open or close the position. Since any robot is based on a strategy, technical indicators are always among its elements.

The main difference between indicators and expert advisors is that an indicator only displays certain data, while an advisor uses this data to make a decision whether to enter or exit the market.

Top 5 Forex indicators

How to choose an adviser for MT4

When choosing a trading robot, it’s recommended to adhere to the following rules:

1. Use only trusted websites: MetaTrader Market, official websites of brokers, or reputable Forex platforms;

2. Choose robots according to the situation you intend to use it in. A scalper advisor won’t work for trend trading;

3. If an advisor promises high returns, it’s almost always a sign of high risk. The maximum risks allowed by an expert advisor must never exceed the your money management system.

4. If possible, it’s recommended to try a demo version of the advisor or monitor its trading activity in real time on Myfxbook.

MT5 trading robots: the new advantages

Unlike those found in MT4, expert advisors in the new version of the platform offer a wider variety and more new parameters that can be added.

The advanced capabilities of MetaTrader 5, including the depth of market, separate accounting for transactions and orders, hedging and netting order accounting systems allow creating trading robots with new functions.

The special development environment MetaEditor is integrated into the platofrm, it’s designed to create expert advisors, while an advanced strategy tester allows assessing the trading robots effectively.

Author: admin

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