Pepperstone

1) What trading platforms and products does Pepperstone offer to its EA clients?

Pepperstone has expanded its product offering to include both Metatrader 4 and cTrader. Metatrader is considered the gold standard in retail FX trading by many traders and the MQL4/5 community is really extensive, so for developers or coders looking to get started in automated trading there is definitely a good foundation of knowledge to build from.

cTrader is the newer software and by comparison the community is not as large, however it is growing rapidly and some people find C# an easier language to code in. While MT4 will always be a favourite there will definitely be growing competition from this newer platform. cTrader has its own EA editor called cAlgo.

2) Why should EA Traders work with Pepperstone?

We believe our low spreads allow EA logic to trigger more frequently and give more accurate entries, exits and signals; EA’s turning over a high volume also tend to save a great deal by using a low cost ECN broker, as even small spread differences can add up to large costs over tens or hundreds of trades; this is even more prominent for clients who sign up through an Introducing Broker to receive rebates.

We also offer sponsorship for a co-located VPS for high volume traders, as well as a really strong support team available 24 hours per day while the market is open. Having a great support staff in place is something we really pride ourselves on.

3) How have you seen the advancement of EA's change the trading environment?

The most significant change has probably been the ease of access to algorithmic and quantitative trading strategies for the retail trader. It wasn’t that long ago that retail clients found it hard to even access foreign exchange markets let alone use sophisticated algorithms. The next battleground might be in high frequency, which is still more in the realm of institutions.

In terms of individual EA’s changing the trading environment, we have noticed some EA’s that our clients use get so popular that they have moved the market due to the scale of orders entered together. In some instances, this means that EAs can become victims of their own success where increased competition at particular market prices absorbs available market liquidity.

4) What should clients look for when selecting an EA?

Durability – something that will last the test of time. Or an EA for different types of market conditions as the market tends to swing between trending and ranging frequently. Often the difference between a good EA and a bad EA is being able to recognise when to stop trading. Sometimes this requires a human element, for example using a trend based EA when the market is trending, and switch to a range based EA when the market is ranging.

5) Does Pepperstone offer any EA's?

We aren't actually involved in recommending or developing our own algorithms as we need to remain an impartial technology provider, though we do run EA’s to get an idea of what clients are using as well as for our own interests – we are traders ourselves after all – and it is good to keep up to date with what is popular.

6) What are the risks and advantages associated with EA Trading?

There are quite a few advantages to automated or algorithmic trading. One of the major hurdles for clients to be profitable has always been the mental or psychological battle over having money at risk. It’s often said that trading is simple, but it isn’t easy. Automated trading removes much of the human error associated with trading such as overtrading, overconfidence or greed, fear or doubt.

Beyond this an algorithm does not need to sleep or eat, and can be working around the clock. This also has a flip-side, in that if the algorithm is not aware of major changes it can be caught unaware and hurt by an event such as a natural disaster or impromptu government intervention which is outside of the EA’s parameters.

7) What style of trading is popular with EA traders at the moment?

The most popular EA’s we have been seeing recently are momentum strategies, with the directional moves in a lot of currency pairs at the moment a lot of the mean reversion style strategies have been switched off. Early in the year there were quite a few popular mean reversion/range trading strategies in use on USD/JPY in particular, but this has since died down due to the US dollar strength, which has been unrelenting.