Published on Tue Dec 30th, 2014
Any Forex trader Googling the most profiting Forex robot or automated strategy shouldn't limit his concerns to its magnificent live trading results and not expect it to be Aladdin's lamp that will make him rich in a few hours, days, weeks, or even months. As you are reading this post now, I wish you had already recognized that using automated trading systems never runs this way!
However, you should take some precautions to secure long-term profitability - which is much safer - before getting a Forex strategy engaged in your live trading sessions.
Precautions of Trading a Forex Strategy on Real Money
- They are basic requirements that should be met by the strategy or Forex robot: making sure of this will save you a lot of time as many of those systems can't pass this check which includes getting good results only by trading on high timeframes, limitation of tradable signals, bad backtest results without tick data, failure to survive for a 12 year backtest, being assisted by many indicators, trading before the closure of the current bar and over-optimized unnatural nice-looking straight up curve on backtests. All of those and more indicate the invalidity of a Forex robot and will be discussed in detail in the subsequent posts.
- Backtesting with high accuracy: this can be obtained by backtesting in a specific platform that is devoid of network connection to a broker or good data, you need to adjust the spread which is the price difference between Bid and Asks and is considered a component of the costs of trading.
- Firm parameter optimizations versus curve analysis: This is to identify any possible fitting issues and of course requires the strategy parameters to be available to be analyzed. This can be obtained through a Walk forward Analysis that doesn't require any extra tools or software other than your Metatrader and is very easily performed.
- Deeper statistical behavior analysis: this should be after confirming that the Forex robot strategy is stable enough by completing the previous steps.
- A trading plan and predetermined decisions: should be outlined and clear as discussed in detail before.
- Any newly designed car should be tested for crashes before getting ridden by humans, as well as Forex robots, too. You should test it on a demo account first for a few trades of 15 to 20 that could be enough to early discover any possible technical problems that couldn't be caught in backtesting without losing money or even coding problems as unexpected reactions to "trade context busy" or "requotes".
- A confirmatory backtest of the past demo 15 - 20 trades: this could evaluate the overall backtesting reliability.
The previous 7 steps conclude the basic required checklist for a Forex robot or strategy to pass in order to be employed for trading real money, as it now has the minimum requirements to make money.
Minimum requirements for a Forex robot to make money
- Full recognition of the strategy behavior and parameters, so for example you won't be doubt its ability to successfully close a trade even if it looks like a losing one, and if you do, you should be sure about your doubts.
- A clear possibilities comprehensive trading plan including all the decisions you should take in every possibility, so you'll have a wiser and rational look at the height of the battle even during long drawdown periods.
- The overall behavior of the Forex robot is devoid of any malfunction, programmatic, or technical problem, if you are the one who coded the robot, you should use some helpful MQL4 testing techniques.