MT4 Automated Trading

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MT4 Automated Trading - What Is It

These brokers offer the MT4 platform, providing support for automated trading. But what is MT4 automated trading ?

What is MT4 automated trading ?

MT4 is MetaTrader 4. This is a platform which supports both discretionary trading and automated trading. In discretionary trading the trader makes the trading decisions (at their discretion), though they may be following rules to do so. In automated trading these rules are codified into computer programs, which make the decisions for them.

Advantages of algorithmic (automated) trading include that the computer does not tire or make overly emotional decisions or other implementation errors, as even the most experienced human trader can. Disadvantages include that automated trading can produce large drawdown or ongoing losses, because the program cannot exercise discretion like the human trader and must follow the algorithm (set of rules) it is programmed to. These problems can be relieved by allowing the human to adjust strategies, but of course this brings back the human element.

MT4 supports automated trading by Expert Advisors (EAs) which are automated trading strategies. The trader can use EAs provided by the the MT4 community or can program their own. MT4 typically offers 30-50+ technical indicators on the platform, but more can be downloaded and the trader can also program indicators. MT4 provides charts with a range of tools, allowing the trader to trade with or without automated trading strategies. MT4 is known for automated currency trading, but it also supports a range of other market, including MT4 Bitcoin trading.

One way to think about automated trading is to consider using a technical indicator. An experience of traders is finding a popular technical indicator on the platform, adding it and then using it in accordance with established rules. A trader may find that they do not apply the rules algorithmically, that is they apply them sometimes and not others. They may do this because they are exercising their judgement or discretion or they may do so because they are tired. Or they may find that they apply them rigorously, and find that this results in losses, leading them to abandon the strategy. An EA which implements these same rules will apply them rigorously and tirelessly and will not abandon the strategy until programmed to do so. Is this an advantage ? It depends on a range of factors.

As Forex is a complex market, it evidences complex moves which can retrace away from the direction the trader entered the market, but then at a later stage may reach and exceed the entry point for the trade (and may not). There is no particular algorithm which can say that a retracement will turn into a successful trade or will invalidate the trade. So a computer program has both an advantage and disadvantage as it can trade though the retracement, while a human trader may not wish to do so.

There is an element of belief in trading, that a hopefully well founded trade will work out, but the experience of waiting for this to happen can be unpleasant. The computer program will not have this reaction, but will simply continue, as it is programmed to do so. However the trader may find that they need the element of human discretion and for this reason traders may wish to combine both approaches when trading this market. MT4 allows the trader to do so and also to access a wide range of EAs and technical indicators others have programmed and to write their own in the MQL4 language.

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