I know that title would get everyone’s attention, but I’m not joking.
I’ve played around with EAs, in demo real world testing, and even had a hand in creating a few of my own EAs with varying levels of success. After all this time, I’m sorry to break it to you, but the majority of EAs out there are complete garbage. As another person put it… “There’s no way someone would sell a get-rich-quick scheme that actually worked for $99”
Why are they complete garbage? It’s simple. Because none of them are capable of trading like a real profitable trader. NONE.
At best you’ll get something that works some of the time, and then blows up in your face once in a while.
The problem is one of the technology and methodology. Essentially, the majority of EAs, and indeed the bulk of trading systems involve a collection of indictaors which should only be used as VISUAL GUIDES to what price MIGHT be doing. When used properly, indicators are (like the name suggests) only INDICATIVE of confirming trading decisions, but should NEVER be used as a TRIGGER for trading decisions!
So you’re probably wondering, what sort of EA could actually trade well then, and on a consistant basis?
Well, I’ve figured that the only EA that could possibly do it would be one that could do massive amounts pattern recognition. I’m talking about the level of computing power required to get a supercomputer to play Jeopardy (which IBM is doing)… and the reason why you can’t have it is because a bedroom programmer doesn’t have the ability to code it (heck, I’ve tried!). Only financial institutions with big pockets have the ability to code something on this scale… and guess what? They aren’t selling their code!
That leaves us with the rest of the bunch. You know, the EAs out there that contain reams of scammy marketing in the blurb.
If you have been around the EA scene as long as I have and know how to code these programs… you will soon see the SAME systems being sold (typically almost verbatim) under different names from the SAME smarmy marketers, again and again and again… and they all eventually fail. Why? Because the market works by finding out where your EAs stop loss is, and moves towards it like a “take profit” target.
Has anyone ever thought for a second… that if all the brokers knew which the most popular EAs were at any given period was, and since they KNEW where the stops of these EA trades would be, that the market wouldn’t move to hit them and take their money?
It’s like painting a target on your own head!
The market is a dynamic monster, in the sense that it sees where the orders are at, and moves to eat people’s stops and collect money day after day after day! It’s not 100% predictable like the sun rising in the east, or gravity on earth. The only way to “beat” the market is to understand how is works, why it moves, and gather enough information about it to make calculated risks with little loss or drawdown.
No EA I have seen does this!
To make matters worse, here is the common list of terrible mistakes EAs make when trading:-
- Over-reliance on indicators! Did you know, that the market KNOWS what the commonly used moving averages are, and how it can force a cross over to trick people, go the other way, and take their money? No?
- Huge Stop-loss with tiny little take profits! Really REALLY BAD money management. If you are trading professionally, you should only have VERY VERY tiny stops of no more than 20 pips. Brokers love these tiny take-profit, huge stoploss bots because they simply hand them the keys to the kingdom!
- Martingale systems! Basically these will blow your account up by using gambling techniques (doubling lot size on losses to recover them). Now, these systems CAN be managed to be profitable… but you WILL have to accept losses and margined accounts. Say goodbye to it working consistently month after month.
- Hedging! Do you live in the USA? Too bad! You can’t hedge anymore thanks to regulations, and it was your only real chance of using an EA that could actually make small profits every month too…that is, assuming you have a lot of equity to make small profits while simultaneously risking the whole lot in a margin call! If an EA hasn’t got a clue how to read the market outside of relying on indicators… hedging was its only saviour! At least with hedging your account might survive with enough equity when the market thrashes it about.
- Scalping the asian session! These were all the rage before 2008. Yes, people actually made money with FapTurbo and their ilk UNTIL it got too big for the market to ignore their delicious stops, and for the brokers to widen the spreads so that they stopped working.
- Not buying low and selling high! Manual trading is all about buying at the lows and selling at the highs. Most EAs do neither of these things, and place stops in places they are likely to get easily hit (like the middle of the trading range!)
Sorry to hear that you were expecting EAs to turn small amounts of cash into huge amounts! Just not going to happen! If you have a huge amount of equity that you want to risk, it might make a little bit one month, but then it just might explode the next week and take everything with it!
So, now that you know all this, what are your options in FX trading?
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learn how to trade manually… but not just any teaching will do. Chances are you will have to spend thousands of dollars on a mentor with a solid track record. You can easily spend a lot of money on rubbish training that gets you nowhere closer to actually being successful, and that because of the huge number of scams out there.
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Use an EA that uses grid/hedging/martingale/pyramiding to take a small amount of money into a lot of money very quickly. Then stop the EA, take profits, and run it again the next month. Expect a few months where your account is blown up. You will not be able to build equity like this, but you might be able to make small profits every month assuming the blowup rate of the EA is low and the chance for profitability despite the blowups is sufficient to make a yearly profit. Also understand that this is just high-tech gambling and not really trading at all.
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Do the impossible and make that market reading EA despite the limitations of MQL and the rigging that goes on within the MT4/5 platform! Yeah, right… like you’re good enough to do that? Good luck!
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Give up now before you waste your money.