Reasons For and Against Algorithmic Trading

If you want to automate your entire trading process, you can develop your own algorithmic trading programs.  These are also called automated trading systems or Expert Advisors if they are developed for the MT4 terminal. This can be a more efficient way of managing your trading activities, but there are pros and cons that come with trading algorithmically.

The main advantage of algorithmic trading is that reduce emotional engagement in your trading, and you can eliminate any subjectivity from your trading activities. Another benefit is that it allows you to backtest your strategy which will give you the opportunity to optimize your strategy and fine-tune your trade entries. Your automated strategy can also work while you’re asleep, catching market opportunities that you wouldn’t be able to take.

Mechanical trading systems have also disadvantages that traders should be aware of. A mechanical trading system can’t adapt to the market changing conditions and can result in costly losses. Malfunctions or mechanical failures can also affect the performance of your algorithm.

Although algorithmic trading might seem to be an easy way to make money, building your own profitable algorithm might require a lot of time and hard work. You also need to be a skilled programmer to develop a profitable system that can survive in the current market environment.

Expert Advisors

Usually, an Expert Advisor is an automated trading strategy or a trading robot that automatically buys or sells in your MT4 account according to its algorithm. They are developed in the MQL4 language. The EAs are not limited too automated trading strategies, but they can also be used in automating your trade management system

The MetaTrader 4 platform gives you a wide range of tools to successfully create your own Expert Advisor. You also have the means to backtest your Expert Advisor as well as to debug possible error in your algorithm.

A library of the available EAs in your MT4 platform can be found in the Navigator window (see Figure 1).

Figure 1: MT4 Experts Advisors

How to Install EAs

The process to manually install an Expert Advisor is quite simple to follow. First, you want to locate the installation files on your MetaTrade4 platform. In order to locate and have access to the file folder where we’re going to copy and install our Expert Advisors directly to your MT4 platform ‐‐> File ‐‐> Open Data Folder (see Figure 2).

Figure 2: MT4 Open Data Folder

It’s important to note that there are two types of files (see Figure 3) for an expert advisor:

  1. The first one is the MQL4 file ‐ which can be edited through MetaEditor;
  2. The second file is the EX4 file ‐ which is the compiled file and it can’t be edited;

Figure 3: EA Type of Files

Next step is to copy-paste your Expert Advisor file in the adequate folder MQL4 àExperts folder (see Figure 4)

Figure 4: EA Installation Folder

After the installation is completed, we’ll have to restart the MT4 platform in order for the Expert Advisors to be viewable on your MetaTrader4 platform. It’s important to always restart after installing the Expert Advisor so the MT4 can recognize the file just installed.

The Expert Advisors are located under the Expert Advisors drop down menu inside the Navigator window (see Figure 1). In order to launch the Expert Advisor, you have to drag and drop it into the chart.

Once the EA is attached to the chart you will be able to see the name of your Expert Advisor at the top right‐hand side of the chart which will be followed by a smiley face (see Figure 5).

There are three distinctive modes in which your Expert Advisor can appear on your chart signaled by three different emoticons:

  • X ” means that your EA is disabled;
  • “ ☹ ” means that your EA is enabled, but the option “Allow Live Trading” is disabled;
  • “ ☺ ” is indicative that your EA is enabled and is working properly;

Next step is to make sure that some other relevant settings under the Menu‐‐> Tools‐‐> Options‐‐> Expert Advisors tab are set properly so that your MT4 platform will allow your EAs to run. Once the “AutoTrading” option is ticked your EA is ready to run.

Figure 5: MT4 AutoTrading

Strategy Tester Window

The Tester window can be located either by pressing CTRL+R or by simply pressing the button on the toolbar. The Tester window has two functionalities – one is for the purpose of backtesting and the other is for EA optimization. Backtesting allows you to see the functionality and the profitability of your Expert Advisors.

Figure 6: Tester Window


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Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.