In principal, every user can develop his own EAs which will trade based on the programmed trading strategy, even automatically depending on the set up. A great number of Expert Advisors – discussed and tested in various forums- are offered at no cost in the internet. Often the “Open Source” concept still prevails which means the source code is disclosed and can is forex megadroid a scam used and modified by the traders at their discretion. On the other side, commercial Expert Advisors are closed systems, the source code cannot be accessed by the trader.
For these cases the buyer needs to rely on the seller’s information regarding the programmed trading system as long as any information is disclosed at all. Many Expert Advisor providers have moved to a stronger protection of their source code. Basically you should have understood the Expert Advisor’s input parameters and trading strategy before its use, regardless whether you use a purchased version or an EA freely available in the internet. EA and to try it on a demo account for a longer period of time, even if the results cannot be transferred to a live account offhand.
Risk-Reward-Ratio The Risk-Reward-ratio indicates the risk appetite of an Expert Advisor. Some EAs offered in the market – in particular Scalpers – show a Risk-Reward-Ratio of 15:1 and more, which indicates a strategy prepared to take risks. A high Risk-Reward-Ratio does not necessarily mean that the respective EA won’t result in good profits. Many current Expert Advisors are also equipped with active risk management which allows a permanent monitoring of the open position and a closing of the position even before reaching the stop loss limit if needed, thus considerably reducing the actual Risk-Reward-Ratio in parts.
Risk per Trade Most Expert Advisors permit the entry of a maximum risk which must not exceeded by individual transactions, but the underlying calculation methods may deviate strongly. In this case a lot equals EUR 100,000, at a leverage of 500:1 a margin of EUR 200 will be required to trade this lot. EUR 100 – be put at risk, the EA would trade 0. Even if the EA considers open trades and allows an available margin instead the credit balance, this would still be a quite daring approach, as the stop limit needs to be observed for an adequate risk evaluation.
A pip has a countervalue of USD 0. If the Expert Advisor works with a stop loss limit of 300 pits, this would result in a maximum loss of USD 1. 500 for this trade, in other words, the account would be erased. USD, the loss potential at a stop loss limit of 300 pips would be USD 3,000 or EUR 2,000 respectively. This results in an order size of 0. 05 lots, as still only EUR 100 should be put at risk.