How Do Forex Advisors Work?

When you trade in the manual mode, it is necessary to do the self-sufficing market analysis, to consider daily forecast and forex news, as well as to choose market entry points. However, automatic trade is also possible; it implies using special software doing most of the trader’s work, which is known as forex advisors.

How do forex advisors work, what are their types, and how reasonable is it to use them?

Many traders who haven’t yet decided if they can entrust their money to a robo trader are interested in the principles of work of forex advisors. Will the advisor keep and increase the entrusted earnings or will it just drain the deposit?  Different forex articles and ads give an impression that an advisor can release a trader from sitting in front of the monitor and let him get rich in a short time. Let us check how true this is.

Forex Advisors Types

Independent robot. This advisor during the required time performs all the operations and  functions of a trader without the trader being involved.

Semi-automatic. This advisor gives tips to trader as per which lot to select to open the deal, what’s the level of take-profit and stop-loss; when opening a position, it may ask your permission. You analyze the market, make decisions, allow or prohibit the robot to perform the operation.

Script helpers. They help to put several positions at a time, and to have take-profit and stop-loss at the required level.

Types of advisors (depending on the transaction form and the strategy):

  • Combined;
  • Multi-currency;
  • Long-term;
  • Short-term.

How does forex expert advisor work?

An advisor is a human-written software, it is based on a standard pattern used in manual trading. Success and effectiveness of a EA completely depend on a strategy and on the creator. Usually forex advisors are used by the newbie traders,  whereas professionals create and test them, though there may be exceptions.

What does a trader need for quality analysis? He needs technical instruments, that is, technical analysis indicators. When a certain situation takes place on the market, the advisor analyses it with the help of the built-in indicators (usually several), and sends a signal to the trader to open a transaction.

The orders are opened in accordance with a predetermined algorithm; for example, if a few indicators simultaneously send a signal to open a transaction. When stop-loss or take-profit comes into action, the position is closed; ditto, when the built-in indicator gives a signal of a trend reversal.

The advisor will function depending on the way of trading offered by the EA developer (on the breakdown or by scalping). The advisors are always based on a certain strategy. In each and every case, this will be a well-known and tested solution; don’t expect to buy an advisor with a unique strategy.

Since any strategy of an advisor is imperfect, this will show up in trading. However, there is an advantage as well: no human error element, trading according to a clear pattern. There may be drains and failures in advisors’ work, the software quality depends on the level of experience of its author, the trader.

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