Look on the internet for a trading robot and we will be bombarded with web pages with many sellers making the claim that with their robot easy money can be made. The robot alone is enough to make us rich!
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.
In the beginning most robots will make money but it's more difficult to get the robot to earn money consistently over the long term.
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.
These indicators are tested over historical data to produce a system that will make a profit and by testing the system a developer can refine their trading robot until it is robust enough to make money.
A developer has to be aware of some pitfalls such as the length of time the system has been tested over. If the system has been tested over a short time period the system would only perform if these conditions continue but remember all markets change with time.
A system that has not been tested over a large time period will not be robust enough to survive these changes. Therefore we must find a trading robot that has been tested over the long term to ensure we maintain profitability.
By looking at a how long a robot has been tested for will give us an indicator of whether a robot is robust. These sales pages will show the length of this testing and if the testing has only been done on a short time period this is an indicator of a potential scam.
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.
Check which vendor is processing the payment of the robot. Some vendors will give you your money back and some will not. Most developers use clickbank marketplace as they will always give you your money back.
This allows you to test your EA thoroughly and if it doesn't pass your testing procedure you will always get your money back.
Once you have you EA set it up on your Metatrader 4 (online trading platform) you can start testing (In this case testing means running your EA over past data to see how it fared). When you start to test in Metatrader 4 you have access to the meta quotes data. This data is short term and is for all currencies in Metatrader 4. It is broken down into different time frames such as 1minute, 15 minute, 1 hour, 1 day etc.
IMPORTANT; the historical currency data provided by metatrader4 is not the best. This can lead to distorted results so we need to use extra tick data to get the most accurate results.
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.
If the robot does not have variable parameters or a stop loss then we should ask for our money back. If the robot does have these things we can start to do our testing using our tick data.
To get our robot tuned to the market we have to decide on how long we wish to run our robot, this could be 1week, 2 weeks, 3 months or more. Once we have chosen this time we need to test the historical data to see what settings we should use.
Let's say we are trading for 1 week. We would then backtest for the previous 2 weeks to get our settings. We then trade live for a week, afterwards we backtest for another 2 weeks including the week we have just traded. The results from this back test will give us our new setting for our trading for the next weeks live trading.
Now we know that by selecting a trading robot that can be tuned to the market can give us an automated way of making money. We also know that only through the use of tick data can we achieve testing results of sufficient quality to make it profitable.
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.
In the beginning most robots will make money but it's more difficult to get the robot to earn money consistently over the long term.
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.
These indicators are tested over historical data to produce a system that will make a profit and by testing the system a developer can refine their trading robot until it is robust enough to make money.
A developer has to be aware of some pitfalls such as the length of time the system has been tested over. If the system has been tested over a short time period the system would only perform if these conditions continue but remember all markets change with time.
A system that has not been tested over a large time period will not be robust enough to survive these changes. Therefore we must find a trading robot that has been tested over the long term to ensure we maintain profitability.
By looking at a how long a robot has been tested for will give us an indicator of whether a robot is robust. These sales pages will show the length of this testing and if the testing has only been done on a short time period this is an indicator of a potential scam.
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.
Check which vendor is processing the payment of the robot. Some vendors will give you your money back and some will not. Most developers use clickbank marketplace as they will always give you your money back.
This allows you to test your EA thoroughly and if it doesn't pass your testing procedure you will always get your money back.
Once you have you EA set it up on your Metatrader 4 (online trading platform) you can start testing (In this case testing means running your EA over past data to see how it fared). When you start to test in Metatrader 4 you have access to the meta quotes data. This data is short term and is for all currencies in Metatrader 4. It is broken down into different time frames such as 1minute, 15 minute, 1 hour, 1 day etc.
IMPORTANT; the historical currency data provided by metatrader4 is not the best. This can lead to distorted results so we need to use extra tick data to get the most accurate results.
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.
If the robot does not have variable parameters or a stop loss then we should ask for our money back. If the robot does have these things we can start to do our testing using our tick data.
To get our robot tuned to the market we have to decide on how long we wish to run our robot, this could be 1week, 2 weeks, 3 months or more. Once we have chosen this time we need to test the historical data to see what settings we should use.
Let's say we are trading for 1 week. We would then backtest for the previous 2 weeks to get our settings. We then trade live for a week, afterwards we backtest for another 2 weeks including the week we have just traded. The results from this back test will give us our new setting for our trading for the next weeks live trading.
Now we know that by selecting a trading robot that can be tuned to the market can give us an automated way of making money. We also know that only through the use of tick data can we achieve testing results of sufficient quality to make it profitable.
About the Author:
Learn how to make forex trading profits as an auto forex trader and make money while you sleep. Or Learn forex trading basics at my website forextradingtutorial.biz and start your forex trading tutorial.
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