What are the potential risk of EA trading?

As with all trading, there are risks associated with using algos to trade for you. We outline some of them below for you. 

  1. The market could move against your positions, resulting in loss.
  2. A disconnect from your internet source may result in the EA ceasing to function, and therefore unable to manage your positions autonomously.
  3. Your EA may not be coded for every different scenario, and may act differently in certain circumstances to the way you expected.
  4. The EA may have errors or bugs in its code. It may fail to work, or to work effectively if so.
  5. You may lose some control of your account if you are not monitoring the trades your algo is placing. Allowing an EA to trade without monitoring means you cannot control what it may do, outside of what is already coded into its logic.
  6. Your EA may not be able to react appropriately to unexpected events, such as errant quotes, price feed and liquidity issues, platform updates, and black swan events (where a major, unexpected, severe market crash occurs).
  7. If you have purchased the algo from a developer, there is the possibility that the EA will not return the amount required to cover its initial cost, and may not prove to be profitable at all.
  8. Poor support may be provided from developers or traders that you have purchased the EA from.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information provided here, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.