Expert advisor
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Not to be confused with trading signal.
Expert advisor (often abbreviated EA) is the term used mainly in MetaTrader-style platforms for an automated trading program attached to a chart or account. It reads market data, evaluates its own logic and sends order instructions to the platform's trade server. The term describes the software, not the strategy it implements.[1]
How an expert advisor operates
An expert advisor is executed by the trading terminal, either on the user's machine or on a hosted virtual server. On each incoming price tick or timer event, it runs its logic and may call platform functions to open, modify or close positions. It can also read account state such as balance, equity and open orders.
Because execution depends on the terminal being connected, an expert advisor stops trading if the platform is closed, the connection drops or the program is removed from the chart. Many platforms also allow backtesting an expert advisor on historical data, though results depend on the quality of the data and on how realistically the test models spreads, commissions and slippage.
Worked example: position sizing by an expert advisor
An expert advisor is configured to risk a fixed percentage of account equity per trade. It calculates position size from the stop distance and the instrument's tick value.
The same formula produces different lot sizes when pip value, account currency or stop distance change, so the expert advisor must read those values from the platform rather than assume them.
Limits and risks
An expert advisor follows its code exactly, including any errors in that code. Common failure points include incorrect handling of requotes, widened spreads during news, server disconnections and assumptions about leverage or margin that differ between brokers. Past backtest performance does not guarantee future results, and an expert advisor that performs well in one market condition may perform poorly in another.
Regulatory treatment of automated trading varies by jurisdiction and by broker. Some brokers restrict or require approval for expert advisors, and some account types do not permit them. The rules that apply are those of the specific broker and regulator, not a universal standard.
Often confused with
- trading signal
- An expert advisor is executable software that places orders itself, whereas a trading signal is only a message or alert suggesting a trade; the visible difference is that an expert advisor appears as a running program attached to a chart, while a signal appears as a notification or published recommendation.
See also
References
- ↑ MetaTrader 4 and MetaTrader 5 terminal documentation; cTrader order window documentation. Field names and defaults vary between builds and between brokers.