When you google expert advisor, you get page after page of carefully crafted sales pages. These pages promise to turn $1,000 into $10,000 in a matter of months. They offer you a hands free way of making a fortune.
All this carefully crafted sales junk creates an illusion that using an Expert Advisor is easy, just set up the robot and it will make you money.
When we use an automated system we are much more likely to make money in the short term but the difficulty is in finding an automated system that will allow us to trade over a much longer time period.
A trading robot has a set of trading rules programmed into the robot. These trading rules dictate how the robot opens and closes trades and these could be based on an indicator or a series of indicators.
The developer runs their mechanical trading programme on historical currency data. In this way the trading rules are refined to produce a mechanical system that produces a profit.
We must be aware of a few pitfalls for the developer as all market conditions will change over time. If an automated system is tested only over a short time period, then the automated system will only produce results for this type of market condition.
If the EA is subjected to different market conditions it stops making you money. You will need an EA that can cope with different market conditions or you can use different EA's in different market conditions.
Checking the sales pages of the EA you can see how long the EA has been tested for. This will not tell you whether an EA will be good to use, however it is a positive indicator. Scam robots are tested over recent data and over optimised to produce fantastic short term results.
By looking at the length of time the automated system has been tested for will give us an idea if our trading system will be able to cope with changing market conditions.
When buying a trading robot we need to look at who takes our payment. Good system developers use clickbank marketplace and this is good for the buyer. If we are unhappy with the robot clickbank will give us our money back (within our money back guarantee time limit).
This allows you to test your EA thoroughly and if it doesn't pass your testing procedure you will always get your money back.
When we have bought our EA we can set it up on the metatrader4 platform and once we have set it up we can start to test to see if the robot is any good. This can be done with historical data.
A word of caution - the data provided by Metatrader 4 is not long enough or detailed enough to provide high quality backtesting results. You will need to get high quality Tick Data to backtest efficiently and lots of it.
To get the best from your EA you need see how it tests. I look for 2 main things when testing. The first is the most important, can I set a stop loss. For me controlling my trading risk is the most important part of trading.
When we use a stop loss we are controlling our trading risk and another thing to look out for is the ability to use variable inputs in the robots parameter section. If we can, then the robot maybe tuned to different market conditions.
By looking to see if a robot has a stop loss and the ability to change with the conditions. This gives us confidence that the robot is sound and we should continue to test. If the robot does not pass these tests then we should ask for our money back.
I run tests on short time periods and this can be from 2 weeks to up to 3 months as I am looking to test an EA to select the correct settings for my forward trading. I then backtest for 2 weeks and find the most profitable settings for this 2 week period.
The settings that gave us the best results over the 2 weeks are then used in our forward trading. After the week of forward trading we would repeat our back testing procedure. This would include the week we had forward tested. This new test would give us our settings for the next weeks forward trading.
By selecting an EA that can be tuned to market conditions and having the skills to be able to do high quality backtesting will give you the edge you need to select expert advisor's that will be profitable over the long term.
All this carefully crafted sales junk creates an illusion that using an Expert Advisor is easy, just set up the robot and it will make you money.
When we use an automated system we are much more likely to make money in the short term but the difficulty is in finding an automated system that will allow us to trade over a much longer time period.
A trading robot has a set of trading rules programmed into the robot. These trading rules dictate how the robot opens and closes trades and these could be based on an indicator or a series of indicators.
The developer runs their mechanical trading programme on historical currency data. In this way the trading rules are refined to produce a mechanical system that produces a profit.
We must be aware of a few pitfalls for the developer as all market conditions will change over time. If an automated system is tested only over a short time period, then the automated system will only produce results for this type of market condition.
If the EA is subjected to different market conditions it stops making you money. You will need an EA that can cope with different market conditions or you can use different EA's in different market conditions.
Checking the sales pages of the EA you can see how long the EA has been tested for. This will not tell you whether an EA will be good to use, however it is a positive indicator. Scam robots are tested over recent data and over optimised to produce fantastic short term results.
By looking at the length of time the automated system has been tested for will give us an idea if our trading system will be able to cope with changing market conditions.
When buying a trading robot we need to look at who takes our payment. Good system developers use clickbank marketplace and this is good for the buyer. If we are unhappy with the robot clickbank will give us our money back (within our money back guarantee time limit).
This allows you to test your EA thoroughly and if it doesn't pass your testing procedure you will always get your money back.
When we have bought our EA we can set it up on the metatrader4 platform and once we have set it up we can start to test to see if the robot is any good. This can be done with historical data.
A word of caution - the data provided by Metatrader 4 is not long enough or detailed enough to provide high quality backtesting results. You will need to get high quality Tick Data to backtest efficiently and lots of it.
To get the best from your EA you need see how it tests. I look for 2 main things when testing. The first is the most important, can I set a stop loss. For me controlling my trading risk is the most important part of trading.
When we use a stop loss we are controlling our trading risk and another thing to look out for is the ability to use variable inputs in the robots parameter section. If we can, then the robot maybe tuned to different market conditions.
By looking to see if a robot has a stop loss and the ability to change with the conditions. This gives us confidence that the robot is sound and we should continue to test. If the robot does not pass these tests then we should ask for our money back.
I run tests on short time periods and this can be from 2 weeks to up to 3 months as I am looking to test an EA to select the correct settings for my forward trading. I then backtest for 2 weeks and find the most profitable settings for this 2 week period.
The settings that gave us the best results over the 2 weeks are then used in our forward trading. After the week of forward trading we would repeat our back testing procedure. This would include the week we had forward tested. This new test would give us our settings for the next weeks forward trading.
By selecting an EA that can be tuned to market conditions and having the skills to be able to do high quality backtesting will give you the edge you need to select expert advisor's that will be profitable over the long term.
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