How to Set Up an Expert Advisor
Have your ever wondered why forex markets sometimes move so aggressively, literally in a blink of an eye when an economic news is being released? How is this possible? The answer comes from trading robots that are instructed to buy or sell based on the interpretation of a piece of economic information. These trading algorithms are basically computers programmed to buy or sell and there is a whole industry that deals with programming and managing these computers. While these moves are mostly being attributed to big players in the industry, like High-Frequency Trading (HFT) algorithms, the retail trader has the opportunity to build a robot as well and to apply it to a trading account. Before going into more details, I will use here the MetaTrader 4 trading platform to explain how to setup such a robot, but it is worth mentioning that a trading robot can be programmed to buy or sell on other trading platforms as well. As a matter of fact, if you trade with a trading platform that is not offering the possibility to attach a robot to a chart, that trading platform is incomplete.
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What is an Expert Advisor and How to Build It?
An Expert Advisor (EA) is a trading robot that can be built using the MetaTrader trading platform and attached to a currency pair to trade it. Such robots are being constructed to buy or sell when specific market conditions are being met, like some moving averages crossing, or an oscillator being overbought or oversold, etc.
If you know how to program such a robot, namely if you’re familiar with the MetaEditor (people with IT programming experience usually find programming in MetaEditor quite an easy task), then the first thing to do is to open the MetaTrader platform and on the menu above just click on the Tools, then chose the MetaQuotes Language Editor and a new program will open in a separate window.
This is the MetaEditor and by opening a New document from the top left, the following pop-up window appears:
If you chose the Expert Advisor option, the next step is to give a name to it and off you go, you can start programming your trading robot. However, if you have no idea about how to program it, simply commission someone else to do that. Assuming an Expert Advisor already exists, what is the next step to do?
Importing an EA to the MetaTrader 4
After the EA is being built in an error-free mode, the next logical step is to import it to the trading platform, the MetaTrader. To do that, the trading platform needs to be opened and from the File tab on the top left of the screen the Open Data Folder needs to be selected. That is the location where the MetaTrader is installed on the computer and next thing is to choose the MQL4, then Experts, and simply Paste the Expert Advisor file there. The expert advisor should have the .mql or .exe extension.
Closing the MetaTrader platform at this point is mandatory, otherwise, the newly created EA will simply not be found. Therefore, after closing and restarting the platform, simply click on the Navigator tab, then on the newly opened window just select the Expert Advisor tab.
Your EA should be there, and this is how it is imported on the MetaTrader 4 trading platform.
At this very moment of time, all you know is that you put a trading idea/setup into a trading algorithm and expect it to function correctly. This may be alright, but how about seeing how it would have been performed in the past in order to have an idea about its profitability?
This can be easily done using the MetaTrader 4 trading platform as well. Just choose the Strategy Tester tab and a new window will appear at the bottom of the screen. This new window allows historical testing and one can select the EA, the currency pair, the time frame, and the period back in time to be tested.
By clicking the Start button and waiting for the data to be processed, MetaTrader 4 is compiling a detailed report with all the trades took, date and time of the entry, the outcome, etc., basically all one needs to know regarding how the Expert Advisor performed.
If the EA turns out to be profitable, then it is time to put it at work!
Attaching the EA to a Chart and Running It
This is a fairly easy task as all you have to do is to select the Expert Advisor from the Navigator tab as explained earlier and just click and drag it to the desired chart. The next thing you’ll see on the top right of the chart is an emoticon that shows a face that is upset, like in the image below. This is because the AutoTrading tab is not enabled and by doing that the emoticon will turn into a smiling face.
If you have a smiling face on your chart, the EA is running and the algorithm will open and close new positions as per the instructions it has. One more little thing to consider before deciding this is the best and easiest way to trade forex markets: if you close the trading platform, the EA will stop working and any open positions will not be closed automatically, neither new trades will be opened automatically. To overcome this problem, there are Virtual Private Servers (VPS) to be rented from various providers. Some brokers are offering free VPS hosting based on the type of a trading account one is having. The VPS will keep the trading platform open 24/7 and thus the Expert Advisor will trade on a constant basis. There are traders that are using multiple Expert Advisors on the same account with the idea being that one EA trades in one direction, another one in a different direction, and overall the exposure is being hedged. This is just another way to use EA’s, but normally, if an EA is profitable, then it should be profitable over the long run. Such a thing, unfortunately, is not that easy to be accomplished.
Other educational materials
- What is Forex Trading?
- What is a Currency Pair?
- Majors and Crosses – How to Trade Them?
- Leverage and Margin Requirements
- HFT (High-Frequency Trading) in Forex Markets
- Trading Sessions and Their Importance
Recommended further readings
- Expert Advisors – MQL5.com
- “Acquisition and Representation of Knowledge for the FOREX Expert System.” Dorn, Jürgen, and Franz Mitterböck. Proceedings of Computer Science for Environmental Protection98 13 (1998).