A Metatrader Expert Advisor is the name which is given to a software program which allows the use of automated trading on the MetaTrader dealing platform.
As the name suggests, it is designed to ‘assist’ or ‘advise’ the currency trader by fully automating each step of the trading process. This includes everything from analyzing the markets in order to find trading opportunities, right through to opening and closing positions on the trading account.
The most sophisticated Expert Advisors (EAs) have the ability to adjust the parameters of their strategy ‘on the fly’ in response to the prevailing conditions of the market. This is the result of the constant calculations made from the latest market data which allows the to work out the latest dynamics of he market and the most suitable course of action to take to maximize the profitably of the software.
The automated approach to that these software indicators take has lead to them being commonly called ‘Forex robots’. This references the mechanical and emotionless way in which they can trade the markets continuously through the trading day.
The key benefit offered by the Expert Advisors is that it brings a purely mechanical trading approach to Forex trading. This helps to eliminate emotion from trading calls and eases the associated psychological pressures which can often affect trading decisions.
Almost all traders at some point will have held onto a position for too long or entered the market prematurely on expectation. Instead Forex robots trade to strict algorithms. They have no emotional attachment to a market or trading position and will only ever execute their orders when all of their specific conditions are met.
The trading decisions of an Expert Advisor are based upon a range of data parameters and specific technical algorithms. The strategies used are purely mechanical and rely on technical analysis and the past price action of the markets. Information from the market is constantly processed, updated and analysed by the software. In fact calculations can be made across many markets simultaneously in just in a matter of seconds.
The computerised nature of these systems also means you can benefit from leaving them running on your account twenty four hours a day.
How Are They Created?
An Expert Advisor is created by software programming and makes use of a unique programming language known as MQL4. This is built directly into the MetaTrader platform itself. This is a highly configurable computer language which can be used for the development of both trading scripts and indicators. These can both run preset functions within the platform to assist with the trading process.
The programming language can be used to reference the many feeds and trading indicators that are already integrated into the platform by default. This information can then be extracted and used to create custom indicators to analyse the the markets for specific events in line with the programmers requests.
After the initial trading strategy has been created it is then complied into what is known as an indicator. At a file based level this in known as either an .ex4 or .mql file (the extension used). This then allows for the indicator to be installed on a a client installation of the terminal.
The wide range of trading strategies that are available for trading currencies means that you will find an equally large number of different types of expert advisors. You can read more about the various categories and types of strategies which are available here.