How to select MQL4 Expert Advisor for your Forex trading
Expert Advisor are created from programming language and tested in MT4 strategy tester. The program language use is similar to C and uses a text editor for coding. The Strategy tester use historical data to test the program and out put the summary results at the end of the testing. User can choose the duration of the back testing period, the currency trading, the time period chart to use and the various algorithm testing model to use.
Back Testing Results that matters.
Many people with programming background can program any strategy into codes call Expert Advisor and let it trade for you automatically. Let’s look at some of the back testing results before putting it to run on live trading account.
This is the first important results to look our for, which is the profit factor. This determine the total winnings divide by the total losses. Anything more then 1 yields profit in the long run. But due to market conditions and trading news outbreak, a profit factor of 2 is more desirable. Anything between 1.3 to 1.8 have to be reinforce with multiple strategy as backup to one another.
Max Draw Down
Draw down is the lowest loss at any point of time the account is trading. Maximum Draw down simply means the maximum lowest amount you have in your capital at any point of time (realized or unrealized profit trades). This is extremely critical to your setting configuration to avoid margin call out. General rule is good to have an EA that product less then 20% max drawn down. Anything 50% to 21% is dangerous and have to be properly set to avoid margin call. Nothing above 70% as it is too risky.
This figure measures the gross profit, gross loss, the duration and the initial deposit. The highest this figure is the better and more profitable is your program. Anything that is more then 100 or 150 will yield profitable results.
Duration of testing
It is important to test the strategy for at least 12 months of historical data as it covers major news release and season changes for majority of the traders. Forex prices will change when fundament news like Non-farm payroll or unemployment rates are announced and the market will react according to forecast difference. During holidays break in United States and Europe and Japan will also affect the volume and forex prices will rise and fall aggressively. The EA have to be tested thru all these events for the year.
Max and Average Loss
Am not looking at winning trades but more on losing trades as this is important for margin call and setting it to run with other automated forex program. Avoid EA which have zero or have little losses, instead look at average loss that is no more then your winnings trade. It may have large losses but on the whole in the long run, averaging it will give small loses and gain your profitable income.
There are other factor like short position, long position, consecutive loss, modeling quality, are equally importance but I put them secondary to Profit factor and Max Draw Down, which I focus mainly when select expert advisor to run my automated trading account.
I support green products and actively involved in recycling movement. Currently am blogging, affiliate marketing, selling holiday gifts online and trading Forex to earn extra income to support family on top of having a full-time job. Visit my website http://www.sngerge.com and share my ideas.
I am currently hosting a Forex review website at http://www.bestforexranking.com and also sharing Forex news, broker, trades and charting information. Last year, I started affiliate marketing and setup http://www.sngerge.com which features free tools and tips. My recent involvement is selling holiday gifts which provide world wide delivery at my personal blog http://leyangshop.blogspot.com
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