Algorithmic Trading: How to Test and Correctly Use Trading Advisors

Algorithmic trading allows you to automate manual strategies on Forex. On the one hand, it is an opportunity to earn even more. Or save time. On the other hand, if the advisor is not under control and not set up properly, it will also quickly "sell" the deposit. If all Expert Advisors were profitable, and all traders were making a profit at the push of a button, the market would cease to exist. So whether you have a manual strategy or an Expert Advisor, the result depends entirely on your experience and how you use the tools at your disposal.

In this article series, you will learn the following concepts:

• What a trading advisor is and how it can help you trade. Where to find a working Expert Advisor.
• Rules for using trading advisors.
• Rules for testing of trading advisors and evaluation of their effectiveness.

This article will be useful for everyone who thinks that algorithmic trading is "easy".

What is a Trading Expert Advisor?

A trading advisor is a program written in a platform language, which automatically follows the algorithm laid down in the code and performs certain tasks. The simplest trading advisors perform standard actions for the manual strategies: opening and closing of transactions, if the specified in the code signals coincide, setting pending orders, calculation of position volume, etc. Professional algorithmic trading is gradually developing as well. Recently, neural networks and artificial intelligence based on machine programming have become widespread. Such robots can run through all possible combinations based on input data and self-train, optimizing the results.

Advantages of trading advisors:

• Automation. Expert Advisor saves time - it looks for signals instead of you, automatically opens and closes deals, places pending orders, set stops, etc.
• High accuracy of signal detection. In situations when the signal formation seems ambiguous (divergence of indicators, blurred patterns), the Expert Advisor makes an unambiguous decision.
• High speed. The Expert Advisor instantly recognizes signals and opens deals. That is why especially relevant are HFT-robots, capable of opening dozens of deals in a second (high-frequency trading).
• Exclusion of influence of emotions on trade. Expert Advisor excludes situations in which there is a desire to violate risk management or open deals under the influence of emotions (euphoria, fatigue, or despair).
• A trading advisor is an auxiliary tool. It cannot fully replace a person, but it can simplify some tasks, including making a decision.

Disadvantages of trading advisors:

• Ignoring fundamental factors. In manual trading, the trader analyzes the news background, which can dramatically change the market situation. Most advisors work according to a preset algorithm and do not take into account the news. In recent years, there are complex automated systems that take into account changes in basic fundamental statistics, but they are used mainly on a professional "industrial" level.
• The need for control. Although the advisors automate the process of managing the trades, they need constant monitoring. There are situations in which it is better to early close the open trade manually.
• The need for constant optimization. The market situation is volatile. And in the case of deterioration of the results, you need to re-learn the optimal settings.
• It is also desirable to have a VPS server. The platform is located on the server, not on the user's computer, so the robot will continue to work in case of a connection failure. But this is the additional cost of renting server capacity.

In the following article, we will consider in detail where to find an automatic working Expert Advisor for Forex. And some other questions

Also, if you want to use all available trading tools to increase your capital as soon as possible - follow this link below, or contact us via live chat. Our experts will help you to choose the best strategy for success.