What is expert advisor?
An Expert Advisor is a program that places orders automatically according to predefined rules. Prop firms generally allow them, except for strategies exploiting a technical flaw such as latency arbitrage.
The term comes from MetaTrader but now covers any automation setup, whatever the platform.
What is generally allowed
Most firms accept the automation of a strategy you could have executed by hand: a robot applying your entry and exit rules raises no objection in principle.
What is almost universally prohibited are approaches exploiting a technical weakness rather than market analysis.
Latency arbitrage exploits the lag between the firm’s price feed and a faster source. It is the industry’s most systematic prohibition, and the one that triggers the firmest cancellation of gains.
Tick scalping and HFT target minute differences across a very large number of trades, which stresses the execution infrastructure.
Martingale — doubling the position after every loss — is frequently banned, because it produces a smooth gains curve followed by a total loss.
The grey areas
Two points are worth clarifying with support before buying.
Off-the-shelf EAs, bought on a marketplace, are sometimes prohibited on the grounds that several traders would be running the same one — which the firm treats as copy trading.
Position management tools — automatic trailing stop, size calculator, scheduled partial close — are not always considered EAs, but the wording of the terms and conditions is often ambiguous.
The useful habit
Ask support for written confirmation before buying, describing precisely what your tool does. A saved email exchange is worth more than your own reading of the terms on the day a payout is blocked.
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Related terms
- Breach A breach is the violation of a risk rule that triggers a sanction on the account. Depending on the firm and the rule involved, it suspends the trading day, cancels a payout, or closes the account for good.
- Challenge A challenge is the paid evaluation a prop firm sells. The trader must reach a profit target without crossing the imposed loss limits, on a simulated account. Passing it gives access to a funded account.
- Copy trading Copy trading means replicating another account's positions. Prop firms prohibit or restrict it almost systematically, including between several accounts held by the same trader.
- Funded account A funded account is the trading account a prop firm allocates once the evaluation is passed. The trader operates under continuing risk rules and keeps a share of the profits, without ever holding the nominal capital.