An expert advisor is a piece of software which works as a plug-in for your trading platform. The purpose of an expert advisor is to automate your own (or someone else's) trading system.
An expert advisor works by monitoring any market for you 24 hours a day, looking to place trades for you once it sees that certain parameters (based on your own, or someone else trading strategy) have been met.
To build your own expert advisor, you need to have a working knowledge of the MetaQuotes Language 4 (MQL4) which is the built-in language for programming trading strategies. There are companies which will (for a fee) automate your trading strategy and build an expert advisor for you based on your own settings. There are also companies which will sell you their own expert advisors.
Most forex expert advisors are developed for the Metatrader trading platform. Developed by Russian programmers, Metatrader had become the standard trading platform for many professional traders and forex brokers.
Once you have built your own expert advisor (usually a file ending in .EX4) or purchased someone elses, the process of setting it up with Metatrader 4 is quite simple. It is just a matter of opening and installing the file into your MT4 platform.
ADVANTAGES OF EXPERT ADVISORS:
The main advantages of trading with an expert advisor are:
1. The expert advisor has a plan. It sticks to this plan and the settings you have developed into it no matter how uncertain the market looks or how you may feel about the market at a particular point of time.
2. The expert advisor is consistent. It can eliminate the negative human aspects of trading which include fear, greed and inconsistency in trading.
3. The expert advisor frees you up from physically having to watch and analyse the charts to find a signal to enter/exit trades. It does this automatically for you so you don't have to sit in front of your computer all day.
4. Freeing you up from watching charts for entry and exit signals also has the added benefit of giving you more time to spend on actually developing your trading strategies, doing back tests and more and more tests.
5. Finally, the expert advisor (or forex robot) can monitor many markets at once, giving you access to many more trading opportunities than you can physically find and analyse by yourself.
DISADVANTAGES OF EXPERT ADVISORS:
1. The robot (expert advisor) does not and will never have the feel for the human and the soft non-programmable issues. The trader must always look at the bigger picture, the fundamentals as well as the hundreds of other important issues which affect the ebb and flow of the forex market.
2. Many traders also choose to use expert advisors for the wrong reason. They believe that simply by trading with a robot they will automatically have better results or be better traders. Essentially, all an expert advisor will help you with is with trading consistency. It will just free up your time to focus on developing and testing your trading strategies instead of physically having to look for and execute trading opportunities.
by Giselle Sanchez - Learn more about building your own expert advisor, how to set up an expert advisor with Metatrader 4 and choose from over 40 of the best forex expert advisors.