HomeTechnologyHow Do Expert Advisors...

How Do Expert Advisors On MetaTrader 4 & 5 Work?

Technology has touched upon every sector, including the forex market. A few decades ago, it would have been almost impossible to think about online trading, let alone trading robots doing the job automatically. But today, it has been made possible. Automated trading has become the new norm in the forex market and for good reasons. So, let’s get into the details and find out how expert advisors work!

The Evolution of MetaTrader Expert Advisors

The MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are by far the most sought-after trading platforms for a number of reasons. Both these platforms were developed by Metaquotes Software Corporation, with MT4 being released in 2005 and MT5 in 2010. The first version of MT4 didn’t come up with the facility to trade using expert advisors. Although automated trading systems have existed since the 1950s, they only gained traction in the 2000s. Thus, Metaquotes Software Corp soon began to work towards it.

MetaTrader 4, which is a standalone trading system, uses MQL4 scripting language, which not only allows traders to develop their custom expert advisors but also offers them thousands of ready-made solutions through the MetaTrader market. After almost 5 years, MetaTrader 5 was released with some added benefits, giving it a competitive edge over its predecessor, MT4. Choosing MT4 or MT5 for automated trading is a matter of choice, but certainly, the popularity of both these platforms stems from their support of automated trading strategies. If you know a little bit of coding, you can easily execute your expert advisors on MetaTrader and even try it out on a demo account before you begin trading with real money.

Signals And Execution in Metatrader Expert Advisors

If you plan to use expert advisors for your trading, you first need to decide the purpose you want to fulfil. Do you want to apply your expert advisor to generate trading signals for manual trading, or do you want to build a fully automated trading system that places trades on your behalf?

Most traders prefer to try a fully automated trading option as it allows them to actively trade in the market and seize opportunities without having to monitor the markets 24/7. However, while using an automated trading system, it’s extremely important that you give the right parameters for your EA to operate effectively, and for that, you need to have a solid trading strategy. When you lay entry/exit rules, stop-loss and take-profit levels on the basis of a strategy that is tried and tested, you naturally increase your chances of making good profits.

To Design or to Use the ones created by others?

Once you have decided to use a semi or fully-automated trading system, the next big question is whether you want to code an expert advisor from scratch or buy a ready-to-use expert advisor from another trader.

Building your own expert advisor from the ground up is not everyone’s cup of tea, as it requires programming skills. But if you are still interested, learning to code or hiring a professional programmer to guide you along the process is advisable. You can find a number of tutorials or guides on the internet that will teach you to set up an automated trading system.

If you are ready to give a try off-the-shelf EA, you can find plenty of them in the MQL community. Some of these trading bots are free of cost, while others may require a fee. Regardless of the trading system you choose, it’s worth testing its performance on a demo account.

What Are Some Of The Metrics Used In Expert Advisors?

If you are wondering how exactly an expert advisor works, let me tell you that it’s a pretty simple process similar to how we manually place trades. Let’s say your strategy involves using Bollinger bands as indicators. When the price hits the upper Bollinger Band, it triggers a sell signal; when it hits the lower Bollinger Band, it triggers a buy signal. You can set this rule in your system when you code an expert advisor. As such, the EA will potentially execute trades on your behalf automatically when the parameters fulfil. One of the notable features of MetaTrader platforms is that they offer a number of indicators, you can apply two or more indicators of your choice to suit your trading style.

Benefits Of Using Expert Advisors

There are numerous benefits of using Expert Advisors, but the most prominent ones are as follows:

  1. The expert advisors operate on certain parameters that have been programmed into it. This means that there’s no room for deviation from the strategy. We all are humans, and we know how at times, our emotions take a toll on our decisions leading us to go against our plan, but with an automated trading system, trades are placed instantly and exactly as per the pre-set rules.
  2. It’s not feasible for traders to be glued to their screens and monitor the charts every second of the day. Fortunately, we can use expert advisors to keep an eye on the markets and place trades whenever our criteria for trade execution are fulfilled. This frees up plenty of time and allows traders to focus on the other aspects of trading or their lives.
  3. Using an expert advisor is not a hit-and-trial method. You can backtest it on a simulated trading environment to see how it would have performed in the past. Although past performance should never be taken as an indicator of future performance, backtesting certainly gives you the confidence to use an expert advisor on a live account.

Cons Of Using Expert Advisors

Despite the benefits, automated trading also comes with its own set of drawbacks:

  1. The fact that EAs work on pre-built parameters means if you have not coded the EA or don’t understand how to code, you only have the option to watch the EA perform. This is not to say that you can’t make profits, if the EA lays strict rules, it will certainly bring you profits, but you will not be able to learn how to enter or exit at the right time and how to manage the risk properly.
  2. EAs are prone to technical errors. If the platform crashes because of a connection issue, network failure or power outage, the EA will stop working.
  3. To deal with the technical challenges of an EA, you can use a Virtual Private Server, but this will cost you extra money.

How To Set Up Using Expert Advisors

Setting up to use Expert Advisors (EA) is relatively easy, but the real work lies in researching and testing different expert advisors. In order to start, you first need to find a reputable forex broker that offers the MT4 or MT5 platform. It’s not a difficult task, given the large number of brokers supporting the MetaTrader suite. Once you have decided on the broker, you can create your trading account, download MT4 or MT5 on your device and then start creating your EA or researching a good one for downloading.

Final Thoughts

MetaTrader is an excellent online trading platform for using Expert Advisors because of its user-friendliness and functionality. Whether you want to develop your own code or buy a ready-made solution from the MetaTrader marketplace, make sure to run it on a demo account before you apply it to your real money.

Most Popular

More from Author

Tech-Infused Future of Visual Content: Unleashing the Digital Canvas

In a world where screens, pixels, and the swift advancement of...

Portable Projector: Ultimate Guide to Compact, High-Performance Displays

Portable projector have changed the manner in which we share content,...

The Benefits of Archiving for Disaster Recovery, Brand Preservation, and Long-Term Sales Growth

In today's rapidly evolving business landscape, organizations are constantly faced with...

Advanced Software Solutions That Can Ensure Confidentiality in Health Care Records

Many companies utilize software programs that can encrypt data, organize countless...

Read Now

The Smart Workplace: Increasing Employee Productivity with Wearable Technology

It should come as no surprise that in a world full of technical marvels, innovation has radically revolutionized the way we work. Slack chats and email inboxes are only two instances of how rapidly and aggressively the office has gone digital. The smart workplace, on the other...

Introduction to Salesforce Integration Bridging Systems and Increasing Efficiency

In the present fast-paced corporate environment, the success of effective communication and data flow between systems is critical. Salesforce is a well-known client Relationship Administration platform, and client interactions, sales, and business operations are managed by it. Many businesses, on the other hand, rely on a variety...

Unleashing Innovation: FPGA Design Services and Choosing the Right FPGA Design Company

Field-Programmable Gate Arrays (FPGAs) have emerged as powerful tools in the world of electronic design, offering unparalleled flexibility and performance for a wide range of applications. FPGA design services and the expertise of FPGA design companies have become essential for harnessing the full potential of these devices....

The Evolution of Artificial Intelligence: Past, Present, and Future

The idea of Artificial Intelligence (AI) has captivated the imagination of science fiction enthusiasts for numerous years. Researchers now believe that what once was considered science fiction can become reality. Artificial intelligence has undergone substantial transformations throughout its history, from the inception of basic algorithms to the...

Ten Exciting Manufacturing Trends That You Need to Know About

It’s a great time to be part of the manufacturing world. Value added in the manufacturing market is projected to reach $14.83tn in 2023 (Statista) The number of manufacturing employees will likely surpass 238 million in 2023 (Statista) Best of all, new technologies and trends are emerging in...

5 Machine Learning Strategies for Businesses

Machine learning and AI have been the stuff of sci-fi films and video games for decades and, finally, reality has caught up to fantasy. AI and machine learning have become popular in recent years, especially devices like Alexa and Siri. AI has become more than just a virtual...

Digital Citizenship: How to Promote Ethical Online Behavior With Your Teens

The digital age has brought countless advantages to our lives, yet with those perks come new challenges, particularly for parents of teens. As our children grow up in an increasingly online world, the importance of instilling ethical online behavior cannot be stressed enough. Parents are now tasked...

What Are Probabilistic Models in Machine Learning?

The term "Meltdown" refers to the process of analyzing data using a computer program. This was one of the earliest methods of machine learning, and it is still commonly employed today. In probabilistic models, unobserved variables are viewed as stochastic, and dependency between variables is captured in...

Transforming Identity Verification with Artificial Intelligence

Identity verification is a critical process in today's digital world. Whether it's opening a bank account, signing up for a new online service, or conducting transactions, businesses and organizations need to ensure that the individuals they interact with are who they claim to be. Traditional identity verification...

AI Chatbots vs. Traditional Surveys: Which One Reigns Supreme for Customer Service?

In the realm of customer service, businesses are constantly seeking innovative and efficient ways to interact with their customers. Two popular methods that have emerged in recent years are AI chatbots and traditional surveys. While both approaches aim to gather valuable customer insights, they differ significantly in terms...

What is DMCA Ignored Hosting and Its Benefits?

In today's digital landscape, website owners and content creators seek hosting solutions that prioritize privacy, security, and freedom of expression. One such hosting option gaining popularity is DMCA ignored hosting. In this article, we will explore what DMCA ignored hosting is, its benefits, and how it allows...

How Do AR And VR Enhance User Experiences In The Metaverse?

Augmented Reality (AR) and Virtual Reality (VR) have gained significant prominence recently. While they have different applications, their combination has opened doors to a new concept called the metaverse. This armour interaction or how AR and VR enhance user experiences and revolutionise how we interact with digital...