Friday, November 2, 2007

Expert Advisors - For and Against Automating Your Forex Trading System

An expert advisor is a piece of software which works as a plug-in for your trading platform. The purpose of an expert advisor is to automate your own (or someone else's) trading system.

An expert advisor works by monitoring any market for you 24 hours a day, looking to place trades for you once it sees that certain parameters (based on your own, or someone else trading strategy) have been met.

To build your own expert advisor, you need to have a working knowledge of the MetaQuotes Language 4 (MQL4) which is the built-in language for programming trading strategies. There are companies which will (for a fee) automate your trading strategy and build an expert advisor for you based on your own settings. There are also companies which will sell you their own expert advisors.

Most forex expert advisors are developed for the Metatrader trading platform. Developed by Russian programmers, Metatrader had become the standard trading platform for many professional traders and forex brokers.

Once you have built your own expert advisor (usually a file ending in .EX4) or purchased someone elses, the process of setting it up with Metatrader 4 is quite simple. It is just a matter of opening and installing the file into your MT4 platform.


The main advantages of trading with an expert advisor are:

1. The expert advisor has a plan. It sticks to this plan and the settings you have developed into it no matter how uncertain the market looks or how you may feel about the market at a particular point of time.

2. The expert advisor is consistent. It can eliminate the negative human aspects of trading which include fear, greed and inconsistency in trading.

3. The expert advisor frees you up from physically having to watch and analyse the charts to find a signal to enter/exit trades. It does this automatically for you so you don't have to sit in front of your computer all day.

4. Freeing you up from watching charts for entry and exit signals also has the added benefit of giving you more time to spend on actually developing your trading strategies, doing back tests and more and more tests.

5. Finally, the expert advisor (or forex robot) can monitor many markets at once, giving you access to many more trading opportunities than you can physically find and analyse by yourself.


1. The robot (expert advisor) does not and will never have the feel for the human and the soft non-programmable issues. The trader must always look at the bigger picture, the fundamentals as well as the hundreds of other important issues which affect the ebb and flow of the forex market.

2. Many traders also choose to use expert advisors for the wrong reason. They believe that simply by trading with a robot they will automatically have better results or be better traders. Essentially, all an expert advisor will help you with is with trading consistency. It will just free up your time to focus on developing and testing your trading strategies instead of physically having to look for and execute trading opportunities.

by Giselle Sanchez - Learn more about building your own expert advisor, how to set up an expert advisor with Metatrader 4 and choose from over 40 of the best forex expert advisors.

Trading Oil and Gas Contracts Using CFDs

Many traders do not realise that Contracts for Difference can be used not just for stockmarket trading, but also in the forex and commodities markets, and one of the most liquid and exciting markets is crude oil and natural gas. CFDs are usually modelled in the same way as futures contracts, and consequently there are several contracts from which to choose in each category.

It is well known that the crude oil market is normally priced either as either Brent crude or US crude. The current spread between the two is about $3.5, Brent being higher, but this varies according to supply and demand, liquidity and other geopolitical issues.

Different contracts

Within each market, several expiration months are quoted and at the time of writing (June 2007) July, August and September CFDs are available. The difference in prices between the various contracts reflects the cost of carry and other seasonal factors as it would for all commodities.

What this means is that you do not pay financing interest on these CFDs, because all positions are rolled over into expiry and the contract values already price in the cost of carry.

What can you trade?

It is possible to trade various many different CFDs related to oil prices. These include:

Heating oil, for which there is a liquid US-based quote with several expirations

UK Oil and Gas sector CFDs

US Oil and Gas sector CFDs

Individual oil share CFDs including such varied names as Royal Dutch Shell, Statoil, Total-Fina, Exxon Mobil and many smaller oil company stocks around the world

US Natural Gas CFDs with various expirations

Calculating the margin on a US crude contract

As we analyse the US crude oil market every day in our US report, it is worth looking at this contract to calculate what margin is required on a trade.

The current most liquid contract is the July 2007 CFD, priced at $65.86 to $65.92

The margin requirement on most commodities is 3% of the total contract value.

The tick size is 0.01.

The contract value is calculated by this formula:

((Quantity) x (Price))/ Point= initial margin

Therefore if you were to buy 10 US Crude Oil CFDs at $65.92

(10 x 49.50)/ 0.01 x 0.03 = $1,978 initial margin.

The exposure per tick is worth $10.

For online traders, CFDs are an excellent way to gain exposure to the oil market as a speculative play, for hedging purposes, or when searching for good arbitrage possibilities. The markets are liquid and spreads are very attractive.

Mike Estrey is the Head of Research for Blue Index, specialists in Online CFD Trading, Contracts for Difference and Online Forex Trading.

Penny Stock Investing and Trading

If you ask anyone in the finance world what they think about penny stock investing or trading , the answer that you will probably get will be: Dont do it. You will lose your money since 90% of penny stock companies are scams. Penny stock companies just want to sell shares and are not interested in developing their businesses. The truth is that investing or trading penny stocks is a very risky business. So here is the most important tip about penny stocks: Invest only money that you can afford to lose.

If penny stocks are so risky then, why do people invest in or trade them? The answer is because you can make a lot of money in a short time if you know what you are doing.

If you are still reading and have decided that you want to trade penny stocks, you need the right tools and good advice to help you survive and even win some money.

Step # 1 Finding the Right Penny Stock to Buy

To discover the right one stock, you will have to do some investigation, or Due Diligence. There are a lot of websites that will help you with your DD and you can find a list of useful ones at

The following points will guide you in learning important information about a company in which you are interested in investing:

1. Share structure: AS (Shares Authorized) and OS (Outstanding Stock) and Float.
2. Transfer agent transparency
3. SEC filing
4. Financial track record
5. Competitive position in its industry
6. Business model
7. Earnings power
8. Valuation or the potential value of the company.

For example, when looking into share structure what you want to see is that there is no dilution. A good sign is when the company has maximized the OS and is close to AS. Watching Level 2 will also give you good indication if there is any dilution from the company. A good strategy is to follow insiders who know the company better than anyone else.

Step # 2 Deciding When to Buy

After finding the penny stock that you plan to buy, you have to find your entry point and how to execute it the right way. Following the trading in that particular stock for a few days together with chart analyzing will give you a lot of valuable information. At this point it is highly recommended for anyone to learn some basic chart reading or at least let others analyze the chart for you. You can ask for help on many of the popular message boards that discuss stock trading and chart analyzing. An important tip about how to execute the trade in a penny stock is: Be very patient and always try to buy at the BID price.

Step # 3 When to Sell or The Exit Strategy

The exit strategy is something very personal to different traders or investors. It is very important to implement your strategy immediately after executing the buy order. In most cases, a good idea would be to set a sell order of 50% of your position at around 20%-30% PPS spike. Another 10%-20% rise of PPS and then sell another 50% of your current position and let the rest ride for a while. In general, your exit strategy should be very flexible and change with news, momentum, and volume. 90% of the time, though, you should sell at the ASK so it wont affect the run.

TIP: Remember always to take profits.

Happy Trading

Ron Kaye is an editor for, Stock Investing and Trading Reports website that publishes stock articles, stock news, stock reports, and shares information on undervalued penny stocks.