When choosing a forex autotrader to run on your account, there are a handful of very important attributes you will want to pay attention to. This checklist should help you stay out of trouble.
Forex EAs or “Expert Advisors” are a rapidly growing market growing day by day. This is a great thing for retail Forex traders, but it is becoming very difficult to understand which automated system to try and which automated systems to completely avoid at all costs.
We created a checklist that every trader MUST … I repeat … MUST use when evaluating any and all automated forex trading systems on the marketplace. Using this checklist will ensure that every trader does their due diligence properly to protect their trading capital.
#1 Money Management:
This is #1 on our checklist for a big reason. Traders have a zero percent chance of making any money without strong and sound money management or risk management in place on every trade they make. To put is simply for any new traders reading this, this simply means that you would never risk more than one dollar, to make two dollars, or two dollars to make three dollars and so on.
Its common that Forex EAs will typically market to their customers that there is a money management ratio per trade programmed into the bot itself, but we have come across far too many where this just simply wasn’t the case. Make sure you figure out if the EA in question has a programmed stop loss, and how far away that stop loss is from the point of entry on each trade to get a get idea if the risk / reward ratios fit your goals as a trader or not.
Objective Trading Rules:
This is equally as important to us as #1, but some traders don’t really care if their EA follows objective trading rules or not. Let me clarify on the term “objective”.. Basically, any trading rules that follow technical analysis or some sort of rules that you can quantify on a chart, or any data means that you have an objective level that you can see when entering a trade, and managing the risk / stop loss for each trade.
For us, it’s in the technical chart analysis. For example, if you look at a trend of any Forex pair, on any time frame, you’ll likely find a trend in the market. A good objective rule for trading trends is to trade either a pullback in a trend, or a breakout in a trend using the pivots of each trend as an entry and an exit.
… Get you an EA that can do both!
Verified Performance HIstory:
Should be self explanatory … but ALWAYS make sure your autotrader has a way to verify the performance history. MyFXBook is a good place to check to see if your EA in question has their performance verified there.
Don’t be surprised if some more proprietary algorithms don’t connect their EA to places like MyFXBook. Not all of them will, but this is a good rule of thumb to go by.
Extensive Customer Reviews:
Good reviews should always outweigh the bad reviews. This doesn’t need much explanation. You can search the EA on Google, or even Facebook as well as MyFXBook as mentioned above to see what other customers or clients are saying about the EA.
Customer Support Base:
It is a very good indication of any system to have it backed by a live / full time customer support base in which you can contact at any time to handle any questions, concerns, tweaks, bugs, etc. Make sure that you send a few emails, live chats, or phone calls before purchasing or subscribing to any EA. Check the response times as well as effectiveness of responses!
A couple of things to remember:
- Forex EAs do NOT mean overnight riches: Don’t expect Warren Buffet level returns overnight, this just isn’t realistic and most EAs will take time to generate returns, just like in any real trading system.
- Never rely on just the EA, know the markets: Understand the fundamentals and risks happening in your market. Its not always smart to run your EA in certain market conditions.
- Try your EA in different markets and different timeframes: This is critical and can help in the overall optimization of the EA you are using in providing better returns to your portfolio.
Remember that trading with EAs can be fun and certainly profitable for traders. But it’s important to always treat the system you are using like you would any other manual trading system. Be sure to use the checklist above to help decipher which EA is right and which EA to stay away from! Leaves some comments below on good systems that you are using, we would love to hear about them as well as your experience.