Free Info – FOREX ExpertAdvisor Mechanical Trading Systems: What Every Trader Should Know

Futures Trading Systems HeaderFutures Trading Systems Spacer

Futures Trading Systems

FOREX ExpertAdvisor Mechanical Trading Systems: What Every Trader Should Know



Free eBook

Free Articles


Free Offer

Futures Trading Systems SpaceriExpertAdvisor- “information and ideas about FOREX trading systems”

FOREX ExpertAdvisor Mechanical Trading Systems: What EveryTrader Should Know 

Most successful FOREX traders use a handful of diverse tradingstrategies. Which strategy used may depend on the particularcurrency pair, recent price action or patterns, marketvolatility and/or a myriad of other variables.

The simple fact that a trader needs an arsenal of strategiessuggests the need for at least one mechanical trading system.

In the recent past, the obstacles to develop, test and run amechanical trading system were significant. Expensive, complexsoftware platforms, coupled with costly real-time data feedsrequired a significant investment of time and money. Inaddition, the quantity and quality of brokers offering suchservices was limited.

Today, this is no longer the case. There are several freeautomated trading platforms available from a number of differentbrokers. One popular platform is MetaTrader 3.0, which uses theMQL II language to develop what MetaTrader calls an ExpertAdvisor. (In addition to MetaTrader 3.0, there is a newerversion, MetaTrader 4.0. MetaTrader 3.0 is generally easier tolearn by a non-programmer and is a better choice for a tradercreating their first mechanical trading system).

Since this platform is free, and most introducing brokers offerdemo accounts, it is an excellent opportunity for a FOREX traderto evaluate mechanical trading without incurring any upfrontcosts.

But what are the benefits of developing and running one’s ownmechanical trading system? Should a trader – especially one whois a not a programmer – spend their valuable time learning thisskill?

The answer is an overwhelming “yes”. There are at least fourreasons developing a mechanical trading system is worthy of atraders effort .

Reason #1: The trader’s strategy must be fully described

The first step in developing a mechanical trading system is todescribe its behavior. The trader is forced to fully articulatethe strategy of their trading system. This includes both thetrade entry and exit.

The trade entry must be described in detail, including concretedefinitions of:the proper market conditions for entry, the tradesetup or confirmation, the final confirmation or trigger.

The trade exit must be fully defined as well. The stop loss andlimit as well as the conditions for exiting must be fullydescribed.

For many traders, articulating their trading strategy proves tobe both challenging and enlightening. The personal growth atrader experiences through this exercise alone justifiesdeveloping a mechanical trading system.

Reason #2: Mandatory backtesting

No trader in her right mind would unleash a mechanical tradingsystem without first thoroughly backtesting the system. Papertrading or backtesting by hand is no doubt a tedious and errorprone process. Fortunately, most brokers offering free tradingsystem platforms also offer the ability to back test – alongwith sufficient historical data to perform the testing.

Since the trader has already fully described and translatedtheir trading system into a working program, backtesting is assimple as pushing a button. Of course, a great deal of testingmay be required, and the results may defy understanding! But thefact remains, executing the back test is a relatively easy task.

Reason #3: Increased discipline

An outstanding byproduct of backtesting is that it readies thetrader for the actual performance of the system. That is,backtesting calibrates the traders expectations of their tradingsystem.

The main benefit of possessing an accurate expectation of one’ssystem is an increased level of discipline. When a traderconducts numerous back tests, they begin to understand therandomness of any one particular trade. This understandingprevents a trader from assuming too much risk on any particulartrade – regardless of the quality of the trade setup. Whiletesting, the trader has seen too many “perfect trade setups”that resulted in losing trades. Again, this benefit alonejustifies developing and running at least one mechanical tradingsystem.

Reason #4: Consistent execution

Consistently executing a trading strategy is the single mostdifficult task a trader faces. The ability to accuratelyinterpret market behavior through a smoke-screen of emotions -fear, greed, anger, elation – is a talent very few tradersactually possess. An often cited benefit of the mechanicaltrading system is its ability to execute trades according to itsrules, with no variation.

The actions required to develop, test and execute a mechanicaltrading system are consistent with the behavior shared by mostsuccessful traders. If done correctly, the results of theseactions reward the trader for the effort; this positiveexperience reinforces the “good” behavior and gradually buildsand strengthens the framework successful traders rely on toremain successful.

Visit us

About the author:

Co-founder of iExpertAdvisor, LLC, Author of “Automatic Alpha:How to Build a Winning FOREX Trading System”, Author of “TheiExpertAdvisor iBulletin”


Futures Trading Systems

Trading Systems – Maintain Your Perspective
Yesterday I received an email: “I have been following yourstrategy CoinCollector for the past two weeks, and it seems thatthe strategy is down by $360. Did your strategy stop working?” When trading a system you need to maintain a long…

Option Trading Tips – Why Would Anyone Trade Options?
Beyond all the ‘hype’ what is it that makes option trading so good? This is a question that I wish more people would ask, but the thing is not too many people know they even exist! The main reason that I love option trading is that options…

How To Make, And Keep, Money Trading Stocks
If you are serious about making and keeping money by trading stocks, then there are three things you need to do, and do well. Money management Orders Trading system Money management Money management comes first. Without…

The Importance of Developing Your Own Forex Trading System
There are many, many different people out there selling their”forex secrets” or trading systems that promise to make you amillionaire in a month. How do you sort through the overload ofinformation to pick the right one, without going…

The Moment of Truth
So you have learned how to trade the markets by mastering a few trading tools like Moving Averages, Channels, Stochastics, MACD, or RSI – that is a great accomplishment achieved by only a few. But having the tools and rules to potentially trade…





SitemapLink to Us

© 2005 by The Smart People Company for Futures Trading Systems

‘3’) {data=data+’&cd=’+screen.colorDepth+’&rs=’+escape(screen.width+ ‘ x ‘+screen.height)+’&tz=’+ntz.getTimezoneOffset()+’&je=’+ navigator.javaEnabled()};i=new Image();i.src=nhp+’://’+’?v=1&s=26&acct=freetradinginfo’+data+’&tks=’+d.getTime(); //]]]]>]]>

Leave a Reply