July 31, 2019, | AtoZ Markets - An automatic trading system, also known as an expert advisor (EA) is an essential tool for any forex trader. The ability to make trades precisely using the EA tools is what differs the successful traders from the average FX trader. An automatic system allows the trader to leverage every opportunity in any market at any time.
Automation in the forex trading world is also a huge convenience for traders who lead busy lives. Their EA trading tool can execute forex trades whilst the human trader is working a full-time job or having a leisure time with family and friends.
As we, at AtoZ Markets, believe this is a topic of great importance, we decided to reach out to the specialists to expand more what "new" colors the future of forex sounds to like.
Axiory's Chief Executive Officer Roberto d'Ambrosio elaborated more on this matter.
Do you allow clients to use Expert Advisors (EAs) automated tool on your trading platform?
Yes, we do. Traders can use the type of EAs they prefer on our platforms. The only limitation is linked to price arbitraging as per T&C and, in order to prevent that trading system environment from any kind of abuse and keep it at the highest performance status, EAs that would produce an unusually high usage of system resources.
Is there any risk involved in using EAs?
EAs are tools that need to be used with caution. Unfortunately, many EAs have been marketed generating false expectations in terms of returns and hiding the real risk that the trader incurs in using the EA.
Traders should know what is the strategy that the EA implements develop the skills to evaluate the results the EA produces, focusing on risk metrics along with the absolute return, with particular reference to the equity drawdown and the leverage usage patterns.
Being an expert in algorithmic trading and a programmer, the other risk is to think that an EA can run 24/7 without any kind of surveillance. Even the most advanced and extensively traded systems can have a bug that went unnoticed.
Finally, I strongly suggest not to use EAs without the necessary, adequate knowledge of the markets it will trade-in, the rules under which it operates and wise use of a risk management system that will trim the exposure on the base of the trading strategy implemented via the EA and its leverage usage pattern.
Do you think automated trading using EAs has the potential to replace traditional trading method?
Yes, but to a certain extent. EAs are a formidable tool to diversify the trading toolbox. They can mitigate the impact of all those wrong behaviors linked to the psychological aspects of trading. But they should not be used to “cut corners” and they cannot completely replace the trader’s analysis of market conditions. There is no system that will perform well all the time. Systems that perform very well in certain market conditions could perform much worse in others.
This situation can be mitigated by using a portfolio of EA to diversify risk and lower volatility of the portfolio, but the trader’s ability to properly build such portfolio being able to analyze the different trading strategies and their level of correlation is still very much needed.
Which account type is best for EA trading?
It really depends on the type of EA and the amount of equity available for trading. For instance, an EA trading a scalping strategy would benefit from a very low latency account, provided that the kind of liquidity the broker is able to deliver to the clients is clean enough for the EA to work properly. A medium to long term trading EA would be less sensitive to extreme performance and then the choice would not be much on the type of account but on the type of support the broker can provide and the stability of the broker trading infrastructure.