Forex trading is one of the most lucrative professions in the world. By learning to trade the market you can take advantage of the leverage trading account and make some big profit even with a small investment. But to live your life based on the currency trading business, you have to be well educated about the dynamics of this market. The trades need to be taken based on technical and fundamental analysis. This is where the role of EAs comes into action.
EAs can be used as helping tools or you can fully automate the trading process by taking a few important steps. Those who are thinking an automated trading method is a very risky process don’t know the process of automatic algorithmic trading. We are not telling you that you will be giving full control to the EAs or the bots. You will be in the driving seat and you can monitor all the trades.
There are four basic principles by which the traders execute new orders with the help of EAs. These four principles automate the trading process without compromising the safety issues related to the investment business.
The four basic things which you must consider to automate your trading process are –
- Selection of the trading platform
- Source code of EAs
- Functions of the EAs
- Trade triggering conditions
Selection of the trading platform
The majority of the traders think they don’t have to trade with the high-end broker to use an automated trading method or EAs. But they are making a big mistake. Without using a robust trading platform, the EAs will not be able to function properly. Let’s say, your trading platform has a 2-second delay in the price feed. So, if you use an automated scalping method, you will often get false reading due to the latency of the price feed.
Finding a good broker who offers premium price feed is not all hard. By doing the basic research you find a list of well-regulated brokers who will offer premium service. Talk to their customer service team and know whether they are supporting an automated trading system. Some of the good brokers might even offer a VPN solution to reduce the latency. It can also be used to keep the EAs running 24 hours a day which will ensure flawless execution of the trades.
Source code of the EAs
The EAs are usually designed by professional developers. It’s very hard to find a skilled developer who knows the INS and OUT of this trading business. Due to this reason, the traders often have to deal with minor faults in the source code. For instance, the developer might create a function that will determine the highs and lows based on a specific zone. Let’s say, if the price of a certain asset trades within a certain range for a long period, the EA will consider it significant levels. But you know this is not going to be true when you are dealing with the lower time frame.
The source code of the EAs must have the ability to analyze the price chart like the professional traders. For this very reason, the branded EAs are so expensive than the traditional ones. So, how to analyze the source code of the EAs? In the case of the custom-tailored EAs, let your developer know that every detail has a critical role in finding the good trades. And if you trade with the readymade EAs, try to find the faults by using the demo accounts.
Functions of the EAs
To make your trading system automated, your EA must have advanced functionality. For instance, the EAs might place 5 pending orders in 5 different assets. So, if one trade gets triggered the remaining pending orders need to be canceled or the lot size needs to be adjusted based on the first trade. The EA must have a trailing stop function as it is one of the most effective ways to ride the trend.
Trade triggering condition
Trade triggering conditions for the EAs comes with default settings. But if you want to make some serious profit by automating the trading method, you have to change the trade triggering conditions based on the market conditions.
For instance, the price range needs to adjust based on the volatility index. And if the market is showing extreme moving movements like Brexit events, the EAs must not take any trade. A robust EAs will have different functionalities that will take the trades by analyzing different metrics.
So, test your automated trading method in the demo environment and bring change to the trading conditions based on your trading style. And make sure the risk factor is always set to low when you rely on such an approach.