An expert advisor is a type of software that can make automatic trading decisions when the trader is not present. They are designed with inbuilt trading rules. So, they do not require a trader to be present for entering and exiting trades. Without EAs, traders would have to spend all day staring at the charts to look for potential trading opportunities. By using them, we can trade easier with lesser stress and more profits. However, you need to be careful while choosing forex robots or you may end up missing opportunities and losing your money. 

You may follow these tips if you want to make the right decision about purchasing a forex robot:

Educate yourself

When you are a beginner in trading, it is easy to fall for catchy and appealing advertisements of EA robots promising instant profits within a short period. The way they showcase their products makes it seem so easy to earn money from the forex market. However, they will never tell you that the most crucial resource for being successful in trading is knowledge. You need to get proper education about how the market operates. Only then, you will be able to spot red signs easily whenever a seller makes unrealistic promises. 

Run a background check

It is very important to clear out any confusion you have before you get into forex trading. So, a thorough background check is a must to get the answers to your questions. For example, if an EA developer claims that his product can generate good profits, visit an unbiased third-party website to check if those claims are verified. This background check may reveal that the details provided by the vendor are not convincing or they are hiding something. In those cases, you will have to rethink whether to purchase the robot or not. Checking online reviews is also a great way of knowing about trading robots. You need to find out about the credibility of the robot programmer, the transparency of the developer’s website, the reliability and security of payment options and money-back guarantees; if offered by the vendor so you can get a refund if you are not satisfied with the EA. 

Study the EA statistics

Before you purchase an expert advisor, make sure that the robot is tested by an independent website. It will save you from being fooled by frauds. Now, when a third-party website tests an EA, it usually shows its performance through some statistics. So, to understand the test results, you need to understand the expert advisor statistics. When you understand them, you will be able to obtain a bunch of information from the test results, such as gross profit, gross loss, total net profit, profit factor, expected payoff, absolute drawdown, maximum drawdown, relative drawdown, total trades, short positions, long positions, profit trades, loss trades, largest profit trade and loss trade, average profit trade and loss trade, maximum consecutive wins and losses, maximal consecutive profit and loss, and average consecutive wins and losses.

Most of these straightforward details, but you need to study statistics well if you want to make sense from these statistical terms:

  1. The profit factor: The most vital statistic that determines whether the trading robot will generate positive results or not. It is the gross profit to gross loss ratio. You need to get the ratio of the sum of all successful trades and the sum of all unsuccessful trades to obtain it. So, the connection between profit and risk is indicated by the profit factor. You should choose an EA with a profit factor as big as possible; it should never be lesser than 1.
  2. Expected payoff: Expected payoff or expectancy is the statistic that forecasts the average amount earned from your every trade. This value is based on historical data. So there is no guarantee that you will get similar results in the future as well. Still, you can see how the EA performs usually from this value. To compute the expected payoff, you need to get the difference between the average profit and the average loss per trade. 
  3. Drawdown: There are three essential indicators of risk in forex trading; absolute drawdown, maximal drawdown, and relative drawdown. From these statistics, you will get the idea of an EA’s performance in trouble. For example, you can see the maximum loss after the last highest value from the maximal drawdown. A volatile EA forex trading robot has a higher drawdown, which indicates a higher risk. 

This is how you should analyse the statistics carefully before purchasing an EA robot.

Test your robot

You may start your research by going through the test results provided by third-party websites to verify the capability of EA robots. However, it is essential to carry out tests on your own. In many cases, traders are manipulated by vendors by fraudulent results of the robots. When they see the fake backtest results, they are convinced that the robot is useful and purchase it, only to suffer from losses. So, you cannot be successful in trading if you trust a robot blindly and buy it. When you visit the vendor’s site, you will see that a trial version or a micro version is offered. You should open a demo account or micro account to try out this version. Thus, it becomes easier to test the robot real-time before making the final decision of buying the full version. You can also use the inbuilt strategy tester tool for testing an EA’s performance. This tool can be found in the MetaTrader 4 trading platform. It is true that you cannot forecast the future in the forex world, but you will be able to gauge the profitability of a robot by using the historical data in the MetaTrader 4 platform. If the backtest results are not satisfactory, then it indicates that the EA will be useless in live trades. 

Carrying out backtests on your own has other advantages as well. From it, you can be sure whether the robot is suitable for your trading style and preferences. It is very important when you are dealing with the ever-changing conditions of the forex market. Keep in mind that choosing a robot is not enough, you also need to understand how it works so you can modify the settings according to the changing market conditions. 

Selecting an appropriate forex robot is crucial for being successful in trading. So, you must invest your time and resources in finding the best robot. Following the tips discussed above will help you make a good choice and grow as a trader. 

So, what are you waiting for? Start researching on fx expert advisors now and earn huge profits from the forex market.