CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.00% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Technical analysis is the foundation of predicting price movements in the financial markets. It allows forex traders to prevent information overload, analysis paralysis, and trading on emotions due to volatility. While technical analysis can provide attractive entry and exit signals, some forex traders feel somewhat overwhelmed about selecting from the many indicators available. This is where Expert Advisors (EAs) help. EAs are automation tools that conduct market analysis and provide trading signals to assist traders in forex trading.
Financial markets can be extremely volatile, presenting several opportunities through the day. This is especially true for the forex market, which is open 24 hours. The amount and speed of information inflow can be formidable and often difficult to manage even with technical analysis cutting out some of the noise.
Forex traders tend to get caught up in confirmation bias, especially when emotions interfere with trading decisions. Confirmation bias is the tendency to verify only what a forex trader feels is the ‘right’ speculation or interpretation of market movements. They may ignore trading signals that indicate otherwise. This may limit the vision of the trader and impact trading decisions.
Further to this, high-frequency and scalping techniques for forex trading require quick responses to market movements to tap on numerous opportunities, even the smaller moves.
In such situations, having an unbiased and logical “assistant” can be a game changer in keeping trading decisions rational and based purely on data. Expert advisors are customisable tools that monitor forex markets (or any market of your interest). They provide trading signals and help traders identify opportunities according to the configuration and individual preferences.
EAs are a set of predetermined rules to gauge the opportunities for a trader to take a position. These rules may include chart patterns, such as head-and-shoulders, and technical indicators, such as RSI (relative strength index) or MACD (moving averages convergence-divergence). The automated monitor observes financial markets to check if the rules of the trading setup are satisfied. When all rules align with market indications, the expert advisor delivers the trading signal to the trader. This is a good way for forex traders with less experience to learn while trading and prevent emotions from interfering with their decisions. The merits of using an EA include:
For a long time, EAs were simply “advisors,” with no ability to open and close positions. With advancements in technology and the popularity of algorithmic trading, forex robots or expert advisor robots have gained immense popularity. These robots are customisable and require additional information. Certain expert advisors and EA-bots are highly customisable and allow traders to personalise the generation of trading signals and complete the job by executing the trade. The personalisation may include the trader’s risk tolerance, capital availability, preferred trading strategy, etc. The EA-bot automatically takes positions without the need for the trader to do anything. Forex traders can alternate between manual trading and using the EA when they are away from their screen.
Once you have your trading plan in place, you can use an EA by following the steps below:
While EAs do a lot of legwork for you, the biggest mistake is to trust it enough to ignore risk management. Even the most experienced traders using trading EAs and EA-bots use sound risk management strategies to minimise risks and preserve gains. Continue to learn about the forex market and refine your strategy while updating the EA configuration as you go.
A common practice among EA users is to opt for the VPS (virtual private server). Since EAs work 24/7, it is beneficial to have a dedicated server for uninterrupted access to trading signals.
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