What Does EA Mean Regarding the FOREX?

by Steven Douglas ; Updated July 27, 2017

EA with regard to the FOREX market is an abbreviation for expert advisor. Expert advisors are also called robots or auto traders and are computer programs written in the MT-4 language. They are downloaded into the online trading platform MetaTrader 4.

Description

EA are computer programs that automatically execute FOREX trades with no human intervention. These programs operate within the MetaTrader 4 environment. Each EA has very specific criteria that define when and how often it will execute trades on behalf of its user.

Uses

EAs are used to eliminate the human factor when trading FOREX. Because they monitor the market continuously, human factors such as sleep, hunger, fear and greed can be eliminated. In addition, they provide a level of consistent accuracy not sustainable by human traders. EAs can execute multiple trades in only a fraction of the time it would take a human trader to do so.

Benefits

EAs offer many benefits. The primary benefit is that because the FOREX market is only closed during the weekend, the EA can accurately monitor the market from Sunday evening to Friday afternoon continuously. This is impossible for an individual trader to do manually. A secondary benefit is that EAs can follow a specific set of trading rules exactly, with no improper interpretation of the rules.

Costs

EAs are distributed in three ways. The most common way to acquire an EA is through a free download from a trading-related website. When they are not free (such as when EA utilizes a new trading concept), they are sold for a one-time purchase price. When an EA has a tremendous record of long term profitability, programmers often add several new useful features and sell the EA on a monthly subscription basis.

Variables

Each EA will have a specific focus that defines its method of trading. For example, an EA based on moving average indicators may only enter a FOREX trade when the 20-day moving average crosses the 50-day moving average. These numeric criteria may be adjusted by the user to meet his own preferences. These adjustable variables are called user defined inputs.

Conclusion

EAs are useful tools for a quantitative trader. When given very specific criteria for entering and closing trades, they are more efficient and less prone to random error than human traders. They are fast, never sleep and are not subject to random bias.

About the Author

Residing near the Central Florida beaches, Steven Douglas has written extensively on resolving small-business issues since 1990 in publications such as ForexFactory, Forex-Tsd, FxStreet and FxFisherman. After earning a master's degree in administration from the University of Maryland, his primary focus has been on international currency trade and how it can be effectively utilized by small businesses across the United States.

Photo Credits

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