micro trading and automated robot systems

[Pharaoh]

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.

 

[Red Herring]

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.

Thanks

But I am not sure what actually mean by Stoplosses or SL in trades! Seen this term so many times in the forums but not clear as I do not know how to use it if it is a tool or a set-up instruction!

 

[Pharaoh]

When placing or modifying an order in MT4 (and most other platforms), you can set a Stoploss. if price goes against you to the point where it touches your SL, the trade closes automatically. This covers you if you lose your internet connection or even if you step away from your computer for a few minutes.

Be aware, a stoploss won't completely save you if there's a big price gap against you over the weekend or if there is a BIG surprice news release that causes a large market movement in just a few seconds. In those cases, the broker will close your trade at the "next available price". Still, using reasonable SL should be your #1 safety net.

 

[TadS]

I would say before digging into forex robots, you need to understand the basics of the forex market and the strategy that your robot is following. FPA is always a good resources and I do believe with the right safety measures and filters in place, an automated trading strategy can be a source of consistent profits. Just make sure you are only using money you can afford to lose and that you don't get too greedy with leverage or stop losses.

 

[duderex]

I don't really quite like with the robot. As they are not giving best reading than us the human. I prefer to learn, practice and do what I had learned and practice.

 

[PhatRoyale]

I don't really quite like with the robot. As they are not giving best reading than us the human. I prefer to learn, practice and do what I had learned and practice.

Same here. However if anyone intend to use one, you just need to do your due diligence to find out which robots are profitable and most suited to the way you would like to trade the market.

 

[FringFX]

So.... InvestQuest, did you pursue robot trading? or did you end up trading yourself?
personal trading is much much more fulfilling, in case you haven't tried it.

 

[itkraze]

even if you have a very good automated system, human element is necessary to get better results. The robot will not distinguish the fakeouts while we can eliminate the fake signals.

 

[Rambo35]

even if you have a very good automated system, human element is necessary to get better results. The robot will not distinguish the fakeouts while we can eliminate the fake signals.

I agree that there is no substitute for a human when it comes to trading. I would never rely on a robot.

 

[Pharaoh]

I think we should place all of our faith in computers and robots.

I know I've made some very poor decisions recently, but I can give you my complete assurance that my work will be back to normal. I've still got the greatest enthusiasm and confidence in the mission. And I want to help you. - HAL 9000

Kill all humans, kill all humans, must kill all hu... - Bender