Program trading is something that many short-term or day traders are interested in studying. In this article, UACTCTK will introduce the most common automated program in foreign exchange trading - EA (EXPERT ADVISOR) - the operating principle, how to use EA on MT5, and the advantages and disadvantages of using EA for program trading.
EA is the abbreviation of EXPERT ADVISOR, also known as: expert advisor, intelligent trading system, automated program trading, etc. The essence of EA is a computer program. Its main function is to transmit trading instructions under specially set conditions, and turn the entire trading process into automation to replace the manual order method. When all positions are opened and closed by computers, it operates 24 hours a day.
EA first originated in the United States in 1975. Due to the rapid development of computer technology and network technology, traders on Wall Street no longer regard watching the market and manual operations as their daily work. Instead, they constantly improve and write their own trading methods based on their daily experience, and then write them into EAs to allow computers to automatically execute the written trading methods.
Since the foreign exchange market operates 24 hours a day, with huge daily trading volumes, frequent short-term fluctuations, and greater interactivity between currencies, the advantages of applying EA are particularly obvious in the foreign exchange market, and EA is therefore widely used in the foreign exchange market.
EA can issue instructions through parameter settings. In fact, it only triggers a "yes/no" at each point fluctuation. Traders can build an EA with their own trading model or import EA created by others. Trading decisions are mathematical models composed of a series of "yes/no" combinations to obtain the final trading instructions and point settings such as opening a position , closing a position , taking profit , and stopping loss . Using the superior computing power of computers, corresponding decisions and actions can be made immediately, which is beyond the reach of manual operation.
EA can be very simple or very complex. Once the set conditions are met, a prompt will pop up, or it can be set to enter the market directly.
简单逻辑的：假定EA设定为今日晚上8点前某产品A点位触及100即需提醒我甚至以资金账户的10%金额进场建立多单；或是当价格超越300参数均线又回踩的话，以2个标准手进场建立空单。
Complex logic: When product A breaks through the 100~120 level, product B crosses the 30-parameter moving average, and index C is above the 300-parameter moving average, a position of 0.1 standard lots is established every 10 points.
As can be seen from the above examples, the complexity of an EA depends on the parameters and conditional settings given to it by the user/trader.
Users can build their own EA programs, or purchase and download EAs created by others. MQL5 is one of the platforms where EAs can be downloaded.
Confirm the installation location of MetaTrader 4 (usually located in the C drive). Move or copy the EA file to the "Expert" folder in "MetaTrader 4".
Open the MT5 program, click "Auto Trading" (located on the left side of the upper navigation), click the plus sign, and the available EAs will be listed here. Drag the EA to be installed to one of the charts.
After dragging the EA to the chart, a pop-up box will appear showing your EA settings, make sure all settings and prompts are correct and press OK.
A complete set of EA can monitor hundreds of products at the same time, so traders don't have to watch the market 24 hours a day. There is no need to switch between different companies or use technical analysis to find signals, and there is no need to miss other trading opportunities because of paying attention to the appearance of signals. With EA, there is a real-time basis for when to enter and exit the market, allowing traders to trade automatically around the clock.
Although the program is written by people, program trading is impersonal. As described in the second paragraph, it only has "entry/exit at this time". It excludes human emotions and ignores the length of time and amount of loss. This kind of patience is better than entering and exiting the market humanly and emotionally, because it has only one principle: "whether to enter and exit the market at this time".
EA can observe various trading commodities on the user's platform, and can set parameters to enable EA to use different strategies in different links. EA with strong computing power can provide signal reference and become a good helper for you in trading.
Parameter setting is just the beginning. Before you actually start using EA, for the sake of accuracy, you will first apply a lot of real historical data to verify whether this trading program is feasible, and you need to find out the problems or even change the original parameters based on the status after backtesting. This ensures that EA can avoid problems when applied to different products before use.
Because EA was originally designed to allow traders to enter and exit the market frequently and profit from short-term fluctuations, most of the EA template settings tend to establish a frequent trading method.
Backtesting past performance does not mean that a certain EA is always feasible. No one can predict the future market conditions, so when using EA, it is not surprising that the EA performs poorly when encountering market changes or cyclical changes.
EA often emphasizes only the winning rate, without taking into account the profit and loss ratio. The accumulated profit over a long period of time may not be enough to offset a major loss. Although EA can be fine-tuned or even replaced, the trader may have become a guinea pig.
The above points can be concluded that algorithm trading is like a double-edged sword. If used properly, it can become a small passive income; however, if used improperly, it may also lead to a total loss, because the profit and loss ratio that each person can accept is different.
However, don’t forget that EA is created by traders, so there will definitely be blind spots. Even if the backtest is run for a month or even a year, it only means that the EA is suitable for the market conditions of that period. Therefore, the longer the backtest time, the higher the reliability.
However, this is also a point that EA is criticized for. The EA model is based on market changes that have occurred in a limited period of time. However, not only foreign exchange, but also changes in the entire financial market can be random or even have never happened before, such as the outbreak of a financial crisis, black swan events, etc. At this time, you need to correctly handle the positions you hold at the moment of the emergency.
All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors and you can lose more than your initial deposit. Please ensure that you fully understand the risks involved, and seek independent advice if necessary.