Trading robots (EAs): realistic expectations

An EA is a program that trades automatically to pre-written rules. They have genuine uses, and they
are also the most oversold product in this industry.

1. What an EA can do

• Execute without emotion — no holding losers, no
  cutting winners short, no
  revenge trading.
• Run continuously — watching the market 24 hours, never missing a signal through
  sleep.
• Absolute consistency — the 500th trade is executed exactly like the first.
• Speed — faster reactions than a person.

2. What an EA cannot do

• Adapt. It follows the programmed rules even when the market’s character has changed
  entirely.
• Understand context. An unexpected headline, a central bank intervention — the EA
  goes on trading as usual.
• Create an edge the strategy does not have. An EA only automates a strategy; if the
  strategy loses, the EA helps you lose faster and more consistently.

3. Three common types

Grid and averaging EAs

They add positions as price moves against them, lowering the average entry. The equity curve looks
beautiful for a long time — until one sustained trend takes the whole account at once.

This is the most commonly sold type and the most dangerous. Its smooth equity curve does not reflect
the real risk.

Trend-following EAs

They enter on a trend signal with a fixed stop loss. A rougher equity curve with many small losses,
but clearly bounded risk.

Scalping EAs

Many trades, small targets. Extremely sensitive to cost and execution — an EA that
is profitable at one broker can lose at another purely because the spread is 0.3 pips wider.

4. How to evaluate an EA before using it

• Ask for a live account statement, at least 12 months, exported directly from the
  broker. Backtest results are not enough.
• Ask for the maximum drawdown. If the seller
  only talks about returns, that is the answer.
• Check whether it uses a fixed stop loss. An EA without one carries unlimited
  risk.
• Look at how it behaved during past crises.
• Run it on demo or a small account for at
  least three months before increasing size.

5. Warning signs

• An equity curve too smooth, almost a straight line.
• A win rate above 90% — the classic sign of a strategy that never cuts losses.
• No published drawdown.
• Backtest results only, with no live account.
• A promised monthly return.

6. About cost

EAs usually trade more than a person does, so cost is the decisive variable. Before judging whether an
EA is profitable, check whether the result is net of the real spread, commission and swap — a great many
advertised results are not.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.