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Does using an expert advisor help you make money in forex?

Expert Advisor Forex Trading2

For many traders, it can take years if not more to see real results in trading forex. While everyone can make a profitable trade every now and then, it takes a lot more to make this consistent.

Many traders strive to make money in forex in a consistent way. But this requires a lot of dedication and practice and of course patience. But when there are automated solutions available, sometimes traders can get tempted to take the short cut.

Some traders swear by trading only with an expert advisor. But there are pros and cons with this as well. For example, if you have a consistently profitable trading system, then by all means, it makes sense to look at automating this system.

In such cases, the expert advisor can be of great help. You no longer need to stay stuck to your trading terminal. Your automated trading system can do the work for you.

However, if you look around, you will see many vendors selling expert advisors. Many times, these vendors sell their expert advisor or EA systems claiming that it will make you rich.

To further convince gullible traders, these EA systems also come with a graph of performance to show how much money it can make you.

Because greed is a major factor in trading, traders fall prey to such marketing techniques. Only after shelling out the money will they realize that the EA doesn’t quite work as it was promised.

By then, it is too late, and the money is also gone. Quite often, the EA vendors can give you many different reasons for the EA not performing.

This brings the question as to whether using (or purchasing) an Expert Advisor will make you money in trading.


Why use an expert advisor?

To answer this question, we must first understand the need for using an expert advisor. An expert advisor is basically an automated piece of software based on code. By coding various logics you can develop a system that can automatically trade for you.

This means that when there is a trading system that relies purely on a set of rules, you can use an expert advisor solution. This rule based system, also known as a mechanical trading system will automatically trade for you.

Automation is a good thing. If it can save you time, then why not.

But then, there are expert advisors that go to the other extreme. These expert advisors claim to make you money and they sell you dreams.

There hasn’t been any recorded stories of a trader getting rich by using such off the shelf automated trading systems.


Learning to trade manually

The first step in forex trading is to understand what you are doing. This means, having to spend time and learn trading manually. This can take a lot of time and also requires dedication and patience from your end.

But without understanding how to trade manually, chances are that you might end up losing more money rather than make any money.

The first step is to learn how the various indicators work. The next step is to then tie these different indicators into getting some context about the markets.

This doesn’t mean that traders should just dump all the indicators onto their charts and blindly trade whenever there is a buy or a sell signal. On the contrary, you should pick out the indicators that are simple and then use other indicators that can compliment each other.

For example, a trend indicator with a momentum indicator, combined with support and resistance levels can give a very good indicator of the markets. You would also know how and where to trade.

Last but not the least, you should also pay attention to your risk management. Many traders simply enter random lots to trade. You might have come across the concept of not risking more than 1% of your capital in a trade.

Following these simple rules will be the first step towards understanding how you can trade. Once you master this, you can then look at developing your own winning formula and then convert it into an automated trading system.

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