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Trading Strategies

How to Build a Successful Expert Advisor

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Automated day trading is probably one of the most exciting things for day traders in the forex community. It offers traders the option to build a mechanical trading system; one that doesn't require human intervention and one that can, of course, make money consistently.

Many traders at all levels often try to test different expert advisors. While there are some good working Forex EA's, it can be a difficult task initially. There are also inherent risks of using an expert advisor, the one that you don't know about.

Three steps to building your EA

In this article, we look at some ways traders can build or plan on how to use an EA.

Step 1

The first step is of course in having a strategy in mind. There needs to be a balance between mechanical rules and discretion. A discretionary based trading system can often be difficult (but not impossible) to code. The downside, of course, is the cost required to code, test and the subsequent iterations.

For traders, the most part of the time needs to be dedicated towards finding a trading strategy. Using the default set of technical indicators is a better option as it can reduce your cost of coding.

Secondly and more importantly, traders should really understand how the indicators work. Simply assuming that short-term and long-term moving average crossovers are bullish and bearish doesn't make sense.

Traders need to spend the time to see under what market conditions the indicators work.

It is also important to have a good money management strategy in mind. Do you want to trail your stops or do you want to take fixed profits? Asking these questions can help traders in the long run. This will incorporate sound principles into your overall strategy.

Step 2

Once the ground rules are in place, building an indicator is the next step. This customized indicator is the middle ground between manual trading and automated trading.

Based on your trading strategy, you can build an indicator that will signal buy and sell conditions on your chart. You can also incorporate take profit and stop levels if it comes to that.

This customized indicator will ensure that you can understand if there are any flaws in your trading system. Based on the strategy used, ensure that the customized indicator can also plot buy/sell signals on price history.

This can offer a quick visual back test that can point you to any potential downsides of your trading strategy that you need to be aware of.

If there are any mistakes, go back to step 1 and reconfigure the settings and apply these to the customized indicator.

It is important to also ensure that you do not fall into the trap of curve-fitting your strategy that will eventually become an expert advisor.

Step 3

Once you are convinced with the performance of step 2, the next step is to make a list, typically like an algorithm. While building the requirements, make sure to have lots of examples, including charts with detailed explanations.

The better your developer understands the requirements, the more robust your expert advisor will be.

Hiring a developer for your EA

Before hiring a developer ensure that you sign any confidentiality agreements about the strategy. Although one needs to realize that in an online world, there is no guarantee that your strategy will be kept secret.

Hiring individual developers is a better option than a company as there is less chance that the developer will tweak your code and re-sell it.

When giving requirements to the developer it is always in your best interests to have them put explanations in the code so that it is easy for the next developer, should you want to switch the developers at a later stage.

Looking for developers on the MQL5 market place or cTrader community can be the best ways to get started. Always make sure to look at the past work of the developer before committing.

In conclusion, designing your own EA is probably one of the most exciting things one can do. If you follow a mechanical trading system, chances are that you can convert that into an EA and exploit your strategy to the fullest.

About the Contributor
Orbex
At Orbex, we are dedicated to serving our clients responsibly with the latest innovations in forex tools and resources to assist you in trading.
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