An Expert Advisor is a set of rules compiled into software. It will place and manage orders without hesitation, without fatigue and without the urge to make an exception on a Friday afternoon. Those properties are genuinely valuable, and they are also precisely what makes automation dangerous: the same indifference applies when the rules have stopped fitting the market.
Before paying anyone for an automated system, the questions below are worth asking in writing, and the answers are worth keeping.
About the logic
- Which instruments and timeframes does it trade? A system cannot be described without this, and an answer of "anything" means no thought has gone into it.
- What is the risk model? Fixed lots, fixed percentage, or based on volatility. If there is no described risk model, position sizing is being left to chance.
- Does it ever add to a losing position? Averaging down, martingale grids and lot-doubling are all variations of holding a loser and making it bigger. They are not automatically wrong, but they must be disclosed, because they change the shape of the loss from small-and-regular to rare-and-structural.
- Does it hold over weekends and through news? Both create gaps, and a stop executed after a gap fills at a price you did not choose.
- What is the maximum documented drawdown in its own tests, and over what period? Always ask for the worst section, not the best.
About the evidence
- Was the result backtested, forward tested, or both? A backtest answers a question about history using hindsight. It is worth having and is not proof of anything forward.
- Which assumptions were used? Spread, commission, slippage and the tick or bar data quality all move the answer materially. A test with unstated costs is not a test.
- Which part of the data was used to choose the settings? If the parameters were tuned on the same period being reported, the result is in-sample. Ask for an out-of-sample stretch where the settings were left alone.
- How long is the record? Six months is a handful of regimes at best. Note whether the period included a genuine stress event rather than assuming it did.
- Are the losing months shown? A statement with only good months is a selection, not a record.
About the commercial terms
- What does the licence permit? How many machines, how many trading accounts, for how long, and what happens when you replace a computer.
- What happens on expiry? Whether positions must be closed manually, and whether an update purchased later carries the settings you chose.
- What is the refund position? Digital licences are usually limited to defined conditions. Read them before rather than after, and expect that a licence that merely underperformed your hopes is not one of those conditions.
Answers that should end the conversation
Certainty about future profit. A guarantee of a monthly percentage. Reluctance to show losses. A request for your broker trading password, which no legitimate seller, verifier or support desk needs, because the only credential that exists for third-party checking is the read-only investor password. Any suggestion that the software works because it never uses stop losses. And the most common one: an impressive equity curve with no description of the risk taken to produce it.
The honest position, from us and from anyone else, is that an Expert Advisor automates a rule, that the rule may stop working, and that the trader remains responsible for the size of the positions it opens.
Risk disclosure
Automated systems do not reduce market risk and cannot remove the possibility of loss. Poorly configured automation can compound losses faster than a person reacts. Nothing in this checklist constitutes a recommendation of any product, including our own, and no question asked of a vendor can produce a guarantee of profit. Trade only capital you can afford to lose.