Are they any good? Yes and no. It depends on your expectations (what you want to use them for) and/or the EA's level of profitability. Just as "apps" are ever evolving for phones, EA's are continuously evolving for trading. Programmers, working alongside traders, are creating more sophisticated EA's to replace the need for manual trading. EA's can be programmed to perform a simple task, complex algorithms, or anything in between. An EA can alert you to a potential trade setup, take over a multitude of routine aspects of your trading, or fully automate your trading from entry to exit.

I'll break it down to the pros and cons, provide a few examples of practical applications, outline some considerations, and then let you decide for yourself.

Advantages of EA's

  • Accuracy and speed of execution
  • Removes human emotion
  • Strategy back testing capabilities
  • Risk management
  • Amazing stamina

Disadvantages of EA's

  • When your computer system goes down, the EA stops working.
  • Creating customized EA's for complex trading strategies may be costly.
  • When platforms are upgraded, your EA may need upgrading too.
  • EA's are only as good as their creators, the strategy they are based on or the tasks they are assigned to do.
  • EA's may not produce the results expected.

Application examples


Speed and accuracy

EA's can be used to trigger an order every X number of pips of market movement; when price action crosses a moving average line; or when a candlestick pattern forms , just to name a few. Also, they are excellent tools when trading a scalping or grid style strategy.

Risk management

Given a stop loss level, the EA can be used to determine lot size, based on a percent of total equity. It can also be used to set your SL and/or TP, implement a trailing stop, or take partial profits.

Back testing

For EA's that fully automate trading, from entry to exit, you can run the strategy tester and see how well it performs with historical data.

Stamina

You can have the EA work day and night.

Emotions

An EA follows the trading plan and "doesn't break the rules" when trading. Also, if fully automated, the stress of watching the trade play out or the need for manual input, is removed.

Considerations

If your trading is dependent on an EA, you can have the EA run on a virtual private server (VPS). By doing so, you would eliminate the need to keep your computer running constantly and you would no longer need to rely on your internet or power connection to keep your EA running. There is usually a cost associated with these servers however; some brokers offer access to a VPS free of charge.

Many EA's that are used for the purpose of speed and accuracy and/or risk management functions can be obtained for free. The performance of the EA can be easily verified manually. If using a fully automated EA, you can back test and also demo trade before going live.

Whether you use a free EA, purchase one, or hire a programmer to create one, it is your responsibility to check that the EA is working properly, as per your intended usage.

Conclusion

Every trader has to decide for themselves whether they want to use EA's and to what extent. EA's are useful tools which can be used to enhance your trading skills, but you can manually trade without them. Why would you want to?
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