Being successful in the FX market which is active for 24-hours straight requires more than just experience and knowledge on the market. While these factors play a significant role in executing profitable trades, they make lack in competing with the execution speed that can be availed by automation. Experienced traders around the world thus often rely on top expert advisors to overcome the challenges that come with manual trading. Here are 8 proven ways to get successful with automated trading using FX EAs.
While you may come across certain strategies that claim in providing high returns of up to 50%, it is better to aim for a realistic approach to minimise the losses. Until being sure about your risk appetite it is recommended to go for low-risk parameters along with a strategy with significant risk management.
Despite the advantages of using an algorithmic-based EA, it can often be seen that traders tend to face losses immediately after using them. Contrary to that it is also a common scenario to miss certain opportunities just because a trader stopped using EA. The error lies in the evaluation process of choosing an EA to begin with. Many traders tend to observe the performance of the EA for a maximum of 12 months and decide to acquire it, or worse they set the risk parameters higher than recommended. Starting to use the EA on a live account before properly backtesting is also another reason for getting into the faulty entry or exit points.
Grid and occasionally martingale approaches are commonly used in strategies, which gradually raise the risk. The stronger the trend, the greater the decline it is about to make. If such methods do not employ stop loss or restrict the maximum risk, they will eventually lead to significant losses. Applying a fixed stop loss parameter thus might be ideal to protect your account while using certain strategies.
While backtesting plays an essential role in determining the performance of an EA, it can also create misconceptions if not conducted properly. Thus it is crucial to keep certain factors in mind before conducting a backtest. Traders often make the mistake of using a spread that is fixed. While usually spreads can be relatively stable it can radically expand in terms of any major news publish. Apart from this, insufficient and poor quality of data along with inadequate teat period can also lead to wrong backtesting results.
This step is one of the most vital ones to make profits in the FX market as choosing a suitable broker can significantly influence the quality of your trading experience. For example, if you are a scalper you might want to go for the broker that charges the lowest spreads and commissions. Apart from verifying their authenticity, you must also need to understand if the broker suits your financial objectives and trading style.
While inappropriate inputs and parameters may influence the backtest results, over-optimizing them can also lead to incorrect conclusions. Certain scenarios like trading at a past trend that may not be useful in the present, lower frequency of trades and more. Testing an EA on a real live account is often the only method to determine if it is over-optimized.
Despite relying on a single method, keeping an alternative strategy in place to cover the loss at such times might result in shorter drawdown periods and more consistent portfolio performance. It is always a better approach to develop a portfolio of at least three lucrative strategies or EAs and reduce the lot size or the risk with each strategy based on its weight in your portfolio.
Every effective trading strategy may experience a downturn occasionally, and as far as the EA maintains within specified parameters, it’s crucial not to halt it. Many traders make the mistake of stopping their EAs as soon as they face the first loss and miss the chances of getting future profitable opportunities.
While these tips can assist you in excelling in FX trading with EAs, depending on the automated approach has many perks as well from eliminating impulsive decisions to getting a faster execution pace.