How To Test A Forex Expert Advisor
Been dabbling with forex automated trading and wish to do it better? If you use Metatrader 4 (MT4) like most of us Forex traders do, chances are, you’ve already gotten your hands on some expert advisor, and you’re here to learn about top recommendations on how you can test and set it up so you get maximum profit and minimal worry.
For those who are clueless, an Expert Advisor (EA) is something like a “rules and instructions” script that your MT4 installation can be set up to run, to take, manage, and exit trades based on rules defined in the Expert Advisor file, which commonly has an “.ex4” file extension.
You may also read more about Expert Advisors and how they work on my Forex Managed Accounts page.
Why Should You Listen To My Rants on Forex Expert Advisor Testing?
I have been trading in various financial derivatives for 18 years, and have taught over 5000 students manual-application strategies in trading binary options and forex, and have been working on over 10 Expert Advisor projects in the last 18 months, one of the best known being “FireYourBossV2”, a hybrid hedging/trend riding EA which has one of the lowest drawdowns and most consistent gains in the industry. I am not a programmer, but I have a lot of hands-on experience in designing, back-testing and tweaking trading strategies till they work. In earlier years, I have also developed strategies for known programs and websites as a “ghost author”.
You can find out more about my Forex Managed Accounts system HERE.
Forex Expert Advisor Testing Should Be An On-Going Process
The most common mistake that most people who run Forex EAs make, is that they stop their test account a.k.a. demo accounts as soon as they start their live account.
This is a mistake. You should always keep it running because it can give you various useful information about the ways and behaviours it works and advance knowledge about and potential problems in its trading or trade management so that you can solve or optimize it early.
Don’t Mess With It Until It Goes Bust
Unless your demo account goes belly up, or is seriously unprofitable, you should always keep it running. This way only, you can see how it will perform under worse-case scenarios and this is very important so that you can plan any intervention measures in advance should you eventually encounter extra-ordinary or emergency situations on your live account. Typically, these would be the situations where your floating loss goes above what you have planned and budgeted for.
You should never be doing manual trades, intervene, or run other strategies on the same account, because then you would never know whether the EA can find its way out of the problem or not – and it would be an inaccurate test.
“If It Ain’t Broke, Keep Fixing It!”
I personally keep several test accounts running individual instances of a Forex EA, a.k.a. Forex Bot, even when I have a live account running. One of them will be a reference account, as mentioned in the previous section, this gives me useful info, and can signal potential problems in cases where large baskets of trades (in the case of hedging-type EAs) start here first. The others will be on either lower or higher risk settings – so that I can again, compare how each of them run. You would be surprised at how sometimes a lower risk setting can out-perform a moderate or high-risk setting. With martingale EAs, this is usually the case in a period of high market fluctuation due to economic concerns in the global arena which have a deep impact on finance. A lower risk setting account can outlast higher risk accounts and close a basket of trades in profit, without emergency measures or human interventions.
Similarly, if I have no problems from my test-run, I will always try to push it for higher and higher gains – either using optimisations in the way the Expert Advisor trades, or using bigger lot sizes, so long it does not over-run my comfortable level of floating loss.
20 Minute Video Lesson: How To Properly Test A Forex Expert Advisor
If you found the above sections useful, then you will certainly love what’s in this video. Not only do I cover the above points in greater detail, I also have many more recommendations for you in testing your forex expert advisor so that you will have the best possible and most profitable experience in your automated trading. This is not a on-screen walkthrough video, but me talking some concepts in easy-to-understand terms. Get ready to take some notes. You may want to listen to this more than once…
I’ll admit it… this could be a very tedious and exhausting process for some. Therefore, some of you will want to just invest in an existing managed system, where all the heavy lifting is done for you. You can read about how you can set up your managed automated forex trading account in just a few minutes and a couple of clicks ON THIS PAGE.