Automated trading to prevent FX beginners and novices from being driven out of the market
People who are interested in automated FX trading are said to be those who, after going through the beginner and novice stages in FX, are at least at an intermediate level or higher and properly perform chart analysis using MT4（MetaTrader）, etc.
Then, is MT4 incredibly difficult? Not at all.
People who are reasonably adept at PC operations at the office or at home, if they take an interest and work on it for 30 minutes after returning home every night, will be able to use it smoothly in about a week. In this day and age, almost everyone can operate a PC, so it’s fair to say that MT4 usage is something anyone can do.
And what I would like to say personally is that even for FX beginners and novices, once you have studied the FX terminology and the news and economic indicators that influence price movements, it is wiser not to focus on discretionary trading as your main method, but to use long-running, highly performing EA (Expert Advisor, automated trading software) in full auto, and at times, using the knowledge learned from the news and indicators to recognize that the market is about to move significantly and decide to stop the EA for now, which is a smarter investment strategy that increases your chances of surviving in the market.
Why?
Among individual investors participating in the FX market, the portion that can survive and continue investing without being forced out is said to be around 10%–30, as heard in various places.
For FX beginners and novices, entering a real account and holding positions causes the margin to expand and contract with price moves, which heightens the gambling psychology; it’s easy to understand that making proper trades under this mental pressure is very difficult.
Even when entries go against you and losses on positions grow, you can’t seem to cut losses, leading to forced liquidations in many cases, which results in a high attrition rate.
However, in the case of EAs, when the market moves against you, trades are settled at a preset stop-loss level, so, for example, even during the chaotic Covid market around March 2020, there were no EAs that suddenly incurred enormous losses among those listed on GogoJungle and currently being tracked for performance.Of course, there have been EAs whose performance deteriorated after a string of losses, but as mentioned above, you can simply stop the EA when that happens.
And, as described later, there are many EAs that over 2, 3, and 4 years have built a winning trading record with a consistently upward profit-and-loss curve, and even in this Covid market have increased their margin as opportunities.
The FX market is composed of the interbank market (international banks) where currencies are traded, the exchanges (FX companies), and the IT systems themselves; the professionals who participate in trading rely mostly on IT systems, with discretionary trading by individuals being a nearly negligible activity—that is, the market is effectively a battlefield where manual discretionary trading by individual traders struggles to compete.
Therefore, individual investors should trade using IT-driven EA (Expert Advisor) while building up market knowledge, and continue FX trading.
So, this turning introduction aside,I will explain how to use and how to choose EAs for beginners and novices.
The contents of this article are
- What EA (Expert Advisor, automated trading software) is?
- Which EA beginners should choose
- Settings after purchasing an EA
- How to check on a smartphone and how to stop or manage trades in emergencies
That's it.
Well, first, what is EA (Expert Advisor, automated trading software)?From here, we will explain.
EA is a program that runs on MT4 (MetaTrader), the FX or CFD trading chart platform, and enables automated trading.
MT4 is a trading chart software born in Russia, where space engineering thrived; since its appearance in the 2000s, its share among trading charts has grown rapidly, and today many FX brokers and securities firms around the world adopt it, and there are many programmers with knowledge to build EAs. Globally there are probably tens of thousands of them, but in Japan it is likely around 10,000, and GogoJungle has registrations of over 5,000 mainly from Japanese programmers.
EA are built by combining technical analyses such as moving averages, RSI, Bollinger Bands, Fibonacci, etc., and are often created by traders who are skilled in investing and programming, who repeatedly backtest on historical data to improve.
Traders employed in modern financial institutions’ internal proprietary trading desks, insurance companies, hedge funds, and asset management firms trade almost all stocks, bonds, and currencies automatically; when a major price-movement factor or concern arises, they trade manually.
They combine technical and fundamental analyses, and due to the information revolution of the last two decades, an environment similar to professionals is now realized for individual investors through MT4.
However, recently there are reports that professionals are using AI and analyzing big data on the internet to trade.
In EAs as well, more and more there are AI-powered learning systems and crawlers that gather information from various sites on the web, analyzing it to guide EA trading decisions.
As an actual example, there are tools like the Crawler / CRAWLER_Lite that crawl and analyze fundamental information to trade.
Parts of the ongoing-performance Crawler / CRAWLER_LiteCrawler / CRAWLER_Lite that are under performance tracking.
Here I deliberately say that beginners and novices should choose an EA, but for intermediate and advanced traders, and even EA operation experts, the EA to choose does not change. What changes are mainly the number of active EAs and the ability to adjust the parameters (settings) of each EA slightly, as well as techniques such as stopping or reactivating based on fundamentals mentioned earlier.
Now, the essential criterion for the EA to choose is simply the phrase: “Long-term track record of excellence and currently high operating rate.”
In reality, GogoJungle has over 17,000 EAs listed, with 4,337 currently under performance tracking as of April 9, 2020. EAs that are not under performance measurement have almost all dropped out due to deteriorating results.
Among them, select those with excellent performance sustained over many years and a high customer operating rate (current running EAs ÷ purchased EAs).
The table below shows the operating-rate rankings as of April 6, 2020.
