EAs and autotrading

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bazmonaut
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EAs and autotrading

Postby bazmonaut » Mon Jul 06, 2009 11:39 am

I have been coding/testing EAs and would like to share my thoughts... this is more of a list of 'notes to self' than anything else.

I have been working quite hard on this for the past few weeks, but I am by no means an expert. I have some observations to share based on a lot of testing and a week of very carefully monitored live trading. This forum seems most appropriate as autotrading may be perceived as the route to 'easy money' for the unwary.

My summary is that EAs can be profitable, but you will need 'proper' live trading experience in order to create and manage them. Also, (for me anyway) they are a useful addition to one's trading arsenal, but cannot replace manual trading...

Please comment if you have something to add...

I'll add more in a couple of weeks when I have more...

The catch(es)

1/ an EA will only be profitable under certain market conditions, don't expect it to be profitable all the time (or even the majority of time)
2/ if you can't understand the strategy behind an EA then don't trade it, otherwise you will not know why it's started to drain your account
3/ never, ever, ever simply set an EA running and let it do its thing trading live on real money - it WILL drain your account dry as market conditions become unfavourable
4/ if you don't know the code in the EA, then don't trade it

What they are good for

1/ an educational tool for backtesting indicators and strategies - to see where and why they fail/win
2/ small 'extra' profit in addition to profits from your 'manual' trading
3/ precision trading without emotion OR judgement (other than rules written into the code) - i.e. would my strategy have worked today if I hadn't been undisciplined (yet again)?
4/ collection of hard data to support/reject theories

From my experience, for an EA to be profitable you need to have VERY VERY tight trade entry criteria. So tight in fact, that you'll be lucky to see more than two trades a week. Maybe others do better with their EAs... (and maybe they have more live trading experience than me anyway, and/or understand the market better)...

...and a profitable EA takes a lot of time and effort to create and test. I have only ONE profitable EA, which gives me less than 5% of total weekly profit. Is this still easy money?

If you want to trade with EAs

The allure is obvious: easy money for doing bugger all. The reality is that the 'effort to reward' ratio for EAs is much higher than for 'manual' trading, due to the work required to develop/run the EA and the relatively small returns they generate (compared to 'manual' trading).

You could take a shortcut and trade with someone else's EA (bought, pilfered or free), but unless you understand it (code and strategy) then it WILL lose you money.

An EA is no substitute for live trading experience - an EA is a mechanised expression of your trading strategy, if the strategy sucks then so will the EA. You will also need this live experience in order to properly manage your EAs - i.e. when/why to unleash them. Is this still easy money?

If you are really serious about exploring the potential of EAs (I am), and assuming you're using a proprietry trading platform (I am), then you will need to learn how to code.

ARE you that serious? Learning coding is not THAT difficult - it just takes time and effort. Is this still easy money? Would your time be better invested getting live trading experience, or better understanding your current strategy?

Testing with EAs

The fun part. I love watching this action replay - cheering the highs and booing the lows. Cursing as the *%&^$ thing refuses to trade, or trades like a demented bookie.

Setting the test to run overnight is no good, as you will miss the 'blow by blow' action, and never work out why it did what it did. You need to watch the screen as the action unfolds. I love the little graph I get at the end, but this is just a souvenier - the results don't mean much unless you know HOW they came about.


Anyways, that's enough musing for now. Glad to have something to contribute to this most excellent forum.

bazmo
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Postby jimmynz » Fri Jul 17, 2009 10:27 pm

hey great thoughts mate,
im having a go at coding my own EA to and been through similar (time consuming) tests.
do you have any recommendations for learning mq4 script?. ive exhausted the java based helper i found and need to implement more parameters.
thanks
jim

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Postby rowdy » Sat Jul 18, 2009 1:19 am

jimmynz wrote:hey great thoughts mate,
im having a go at coding my own EA to and been through similar (time consuming) tests.
do you have any recommendations for learning mq4 script?. ive exhausted the java based helper i found and need to implement more parameters.
thanks
jim


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Postby Patch » Sat Jul 18, 2009 3:37 am

jimmynz

When thinking about EAs a couple thoughts come to mind. First I take TROs comments very seriously.

1) I would first ask him what the several pitfalls that he experienced.

2) You need to spend some time doing research and talking to successful traders who use and don't us auto trade systems about their experiences and recommendations. If you know the short fall and serious draw backs, you can program many of them into you auto trader. Perhaps some not.

3) What happened to the each of major FX pairs from September 1, 2001 through September 1, 2002?

4) If I were considering auto trading, I would not leave my system running 24/7. Should you carry over night? Over weekends? Enter trades any time, including leading up to and after major announcements line non farm payroll, etc?

5) I would encourage you to not code your initial EAs. There are too many things you do not know about that will hurt you big time. Finding a great and reliable coder is a difficult task. I heart a lot of boasting, and too often it was all hot air.

6) I would say the best way for you to learn coding is by begin by opening up one of TRO indicators that you really like, print it out, and figure out what he is doing line by line. It is kinda like reverse code learning.

7) This is all out of order, and the most important aspect of designing you autotrader is to clearly define your trading plan that is to be translated into code for you EA. What would happen if you were in an auto position, and there was a terrorist strike in your home land or the USA or England and your exit condition was blown through, then what? What about lesser things like your TR4 broker doubling or tripling the spread to enter? etc?

8) Approach this entire project slowly and with extreme caution.

So off the top these are some of my thoughts from my lessons learned. I am in the midst of a project I started and decided to put on hold for a while. One of the exits I put in was exit after x (input) bars. Buzzards have been around for a long time.

I went through four programmers that sounded great, and were dissapointments. The fifth man is a jewel and an experienced trader and excellent programmer. If you are interested I will dig up his name and information for you.

ttfn,
Patch
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ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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Postby jimmynz » Sat Jul 18, 2009 3:44 am

thanks patch

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Postby monolisa » Sat Jul 18, 2009 3:47 am

All good advice, bazmo and Patch.

BTW you might have heard of the new version of fapturbo. Wonder how it performs...

Lis
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Postby Patch » Sat Jul 18, 2009 4:07 am

Good evening MonoLisa

It is 11.55 pm EST here in Virginia. What time is it on the western front. In my quest to read and snapshot posts that catch my attention for any reason what so ever, I am thinking about long and profitable trades, and short bandit strikes, punch, grab 5 (against the trend) and 10 pips from the banks and vanish like Zorro, that being 5 and 10 on 50 contracts.

I bought fapturbo ONE and shortly after getting it read if you can't go through the code, line by line, and know exactly what you, via the code, are doing, you are not trading but blindly being lead. That is when I decided no more black boxes for me.

So far as what times to trade, perhaps the first hour or two hours after my favorite markets open. I want to collect hour data on the main ones people trade her on kreslik and run the ATR on each and line them up by hour, by day of week and a couple other parameters I'm thinking about.

Deep down inside I truly do believe in autotrading with fail safes like if stops get jumped over in a lightning fast moving market, and other hazzards we Pirated need to be wearry of and protect ourselves from.

Good night Liz and Pirates around the world,

Patch
ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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Postby monolisa » Sat Jul 18, 2009 4:17 am

Good afternoon Patch, it's noon here.

I also don't trust "black box" EA - without knowning how it works I cannot imagine how I could let it to trade my hard earned money.

A robust EA is supported by a sound principle. You also need to be flexible to accomodate the changing market.

Lis
"Know your enemy and know yourself, find naught in fear for 100 battles. Know yourself but not your enemy, find level of loss and victory. Know neither your enemy or yourself, wallow in defeat every time." - Sun Tzu

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