Based on my knowledge of experts advisors, I was trying to categorize them. It turns out that I cannot categorized them distinctly. Let’s look at the various categories first:

Non-directional vs directional

Expert advisors that adopts non-directional strategies are usually based on hedging or non-directional trading models such as one based on the mean reversion theory. Directional expert advisors trade news, breakout, trend, range etc.

Indicator-based vs price action-based

Indicator-based expert advisors use one or more indicators in determining trade entries whereas price action-based expert advisors merely use price action, which can even be candlestick patterns or chart patterns.

Single currency vs multi currency

Some expert advisors trade with only 1 currency while others, especially hedging expert advisors, require trading with more than 1 currencies. The PID expert advisor needs to trade with 13 different currencies at a go!

Rule-based vs self learning

Rule-based expert advisors trade exactly in the manner that their programmers want them to trade. A breed of self learning expert advisors make use of machine learning techniques to learn about the market and adjust themselves to trade accordingly. An example of such an expert advisor is the Bogie. The Bogies uses neural networks to “improve perceptive intelligence on order entries”.

Fully automated vs semi automated

There are some expert advisors that can (or they claim they can) run on their own 24-by-7 without human intervention. Of course that is the ideal case. Most fully automated expert advisors require optimization regularly so as to stay in tune with the current market conditions. Some expert advisors, on the other hand, are developed for the purpose of semi-automation. For some expert advisors, one may need to analyze the market and only deploy the expert advisor only if the conditions are right. In some cases,  the level of automation may just merely be to adjust stop loss to trail for profits.

Regular position sizing vs special position sizing

Position sizing is how an expert advisor determine how many lots to enter. Actually, I ran of ideas to term this properly. Let me describe what I mean and perhaps you can help to propose a good terminology

Regular position sizing is determining how many lots to enter based on traditional position sizing techniques. For instance, the position sizing rule may be: the amount to risk for every trade is 5% of total account balance. And this is a hard and fast rule. The number of lots to enter only increases if the account balance increases.

Special position sizing adopts techniques such as Martingale or anti-Martingale (may or not may be on top of regular position sizing). For certain Martingale expert advisors, the number of lots to enter for the next trade doubles after every losing trade!

It is good to know more about your expert advisor and understand how your expert advisor works.

image by greefus groinks

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