Pharaoh
Brigadier General
- Messages
- 20,313
Here's my short list of the basic flaws in most robots:
1. No Stoplosses and hold the trades forever. A lot of bots do this. In a sideways market, it works. If a trend forms and runs against your open position(s), Mr. Margin will be calling you soon.
2. Small takeprofit/huge SL. These are usually optimized to show "NO LOSSES IN 10 YEARS OF TESTING". Think of that like looking at traffic cameras on an expressway and having a computer optimize the perfect course to drive the wrong way while changing lanes to avoid head on collisions. It only works in hindsight.
3. Super trend followers - Pop open a weekly chart on a few pairs. Look for a multi-year trend. During those years, you just trade on pullbacks and you won't lose many trades - until the trend changes.
Here's my solution:
Work out a system for a certain type of market condition, then add indicators that will block trading when the markets aren't in that condition. Always use reasonable SL, and hard code it - if you are terrified of stop hunting, but the hard stop 25-50 pips past the point where the EA will try to close. This protects you if your MT4 platform gets disconnected from the broker. Also, don't leave trades open over the weekend. I've seen too many huge weekend gaps recently.
Once you have this, backtest it successfully, demo test it successfully, and run it with some success in live trading, then develop a system for a different set of market conditions.
Monitor the results of each system. Don't over-optimize, but do adjust over time.
1. No Stoplosses and hold the trades forever. A lot of bots do this. In a sideways market, it works. If a trend forms and runs against your open position(s), Mr. Margin will be calling you soon.
2. Small takeprofit/huge SL. These are usually optimized to show "NO LOSSES IN 10 YEARS OF TESTING". Think of that like looking at traffic cameras on an expressway and having a computer optimize the perfect course to drive the wrong way while changing lanes to avoid head on collisions. It only works in hindsight.
3. Super trend followers - Pop open a weekly chart on a few pairs. Look for a multi-year trend. During those years, you just trade on pullbacks and you won't lose many trades - until the trend changes.
Here's my solution:
Work out a system for a certain type of market condition, then add indicators that will block trading when the markets aren't in that condition. Always use reasonable SL, and hard code it - if you are terrified of stop hunting, but the hard stop 25-50 pips past the point where the EA will try to close. This protects you if your MT4 platform gets disconnected from the broker. Also, don't leave trades open over the weekend. I've seen too many huge weekend gaps recently.
Once you have this, backtest it successfully, demo test it successfully, and run it with some success in live trading, then develop a system for a different set of market conditions.
Monitor the results of each system. Don't over-optimize, but do adjust over time.