FX Expert Advisor

On Sep 29, 2011 | In Forex Tips | by Forex

So you’re thinking about investing in an FX expert advisor to do your currency trading for you, but how do you choose between the hundreds of different Forex EAs out there?

Do you look at how popular it is? Well, I’ve seen a lot of hyped up systems bite the dust in a matter of days, and practically unknown systems performing superbly month after month, so I wouldn’t rely on popularity to make a decision.

What about how big the potential returns are? Well, unless the developers have a written contract to guarantee you the returns they promise, I wouldn’t pay to much attention to that either.

So what else is there to look at? Personally, I believe that if you only see what the average person sees, and you only do what the average person does, then you’ll only ever get average results. And we all know that the average person loses money with an FX expert advisor, so you’ll need to go above and beyond that to make a good return for your investments. Thankfully, you’ve got me to guide you through this tricky process of selecting the right Forex EA for you.

What You Need To Consider When You’re Looking For An FX Expert Advisor

Most people immediately make a critical mistake in their search for the right FX expert advisor. That is, they don’t consider their own trading beliefs and preferences when making a decision. This is a huge mistake, because how you think about the markets is a vital component in the successful operation of any Forex EA that you will buy.

For example, a friend of mine got into some serious strife with his trading system recently. He is a strong believer in “fading the trend” and “taking quick profits and riding losses”, which is ideal for trading a scalping/range type system. However, he decided to buy a trend trading system because he heard that it had good profits. Guess what happened next?

Well, the FX expert advisor did well for the first few days, but as he went through the trades he saw a few that he personally wouldn’t have taken because of his beliefs about the market. So he started skipping trades and even taking opposite positions to the recommended trades, and obviously missed some profitable trades and ending up losing money overall. Finally, he decided that trading the trend “doesn’t work” and abandoned the system altogether, just before it signaled a number of very profitable trades.

The moral of the story is that you can’t make an informed decision about any FX expert advisor until you know your own trading beliefs and preferences. Otherwise, you’ll end up going through the same internal conflicts as my friend did, and end up sabotaging your Forex EA and missing out on the eventual profits in the long run.

Matching Your Preferences With The Right FX Expert Advisor

When you have a clear picture of the kind of FX expert advisor that will be right for you, then it’s time to take your search to the marketplace. The first thing you should look at when considering any Forex EA is the trade history. More specifically, you are looking at the characteristics of the winning trades and the losing trades.

Typically, if the winning trades are frequent and small, and the losing trades are infrequent and large, then it’s a scalping system. If the winning trades are infrequent and large, and the losing trades are frequent and small, then it’s a trend following system.

There are many systems based on various other philosophies as well, such as breakouts, fading the trend and trading the range, so if you are in doubt, email the developer and ask them to explain to you what the philosophy behind the system is. If they are secretive about it, chances are they don’t know what they are doing or they are hiding something. Either way, that’s a bad sign, and you should stay away from these Forex EAs.

Once you have found an FX expert advisor that you think is right for you, then the only thing left to do is to try it out and see if it measures up to your expectations. Any developer worth their salt will provide you with a lengthy warranty period and a money back guarantee, so use this time to try it out on a demo account. That way, you don’t risk any of your money in the process, and you may come out from the other side with a winning FX expert advisor on your hands!

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