Why is it so difficult to create a winning EA?
There are. Forex is all about money management and excluding emotions and greed. Thats why even in signal provider services(which i wont mention due to advertising rules) that autotrade in subscriber accounts there are subscribers that are winning and those that keep hiting margin call or losing due to the simple fact that they didnt follow money management rules. You can have a signal provider that say makes 400 pips per month but tells you to use 0.1 lot per $1000 of account balance this monthly would make you $400. Lets say a subscriber invests $3000 now and instead of toping up the balance to say $12,000 in order to use 1 lot and make $4000 per month the subscriber can get greedy and use 1 lot on the $3000 hoping that if the account could survive just a month then he would have returned his initial investment. Once this happens the sp then experiences a temporary dd of say 200 or 300 pips that scares the subscriber who is now left with $1000 or gives him a margin call. And he disables the signal provider or EA, leaves with the losses and gives negative review but later on the same month the signal provider or EA makes 600 pips profit making a net profit of 400 pips. Then on the signal provider performance page the chart shows the signal provider or EA made +400 pips while the follower made -200. What would the follower say? One of the following:
1.) Its the brokers fault they steal from clients.
2.) The signal provider or EA cooks the performance page
3.) The signal provider or EA is a scam
Rarely would the trader wake up, see that it was his own doing and make a change. If he did he should be saying:
1.) I used too big a lot size
2.) I used too big a lot size
3.) I used too big a lot size
I would suspect that most of us at this forum do not yet have a winning program. Why? I don't think it's a lack of programming skills.
I would suspect that most of us at this forum do not yet have a winning program. Why? I don't think it's a lack of programming skills. The people at this forum are very generous in helping solve programming problems. Perhaps it's because we can't observe the market clearly enough to come up with the winning patterns. Or, what do you think the effect of thousands of computers running very sophisticated software has on our ability to develop a winning program? Is it possible that once a winning pattern starts to form these more sophisticated programs can detect the trading population’s investment in that pattern and destroy the profitability of that pattern? Should we be creating programs that sense and respond to changing market conditions?
I think most seasoned ea programmers have profitable ea's (including many in this forum). Regarding the profitability, make sure to test your strategy using a ZERO spread to filter out those which are really not profitable and keeping those you have to improv but not ignore. Backtesting conditions can make you discard profitable trading setups. And why is it difficult? Well, the spread+slippage+lag+requotes tilts the odds against you, that is why you need to come up with a GREAT strategy.
I wonder if there are broad definitions to "winning"?
I would think if one had a EA that produced, say 95% successful trades, and turned a 10% profit over a year, that it could be a winner to some and a waste of time and money to others. The drawdown might create ulcers for some and be acceptable risk to others.
Maybe we should talk about goals of EAs instead? For example, just creating a steady second income? or doubling one's money every 3 years?
MisterDog you start! Describe your goals or your definition of a winning EA - and be as specific as you can.
sn
Some good points -- It's not simply a 50-50 chance, buy or sell when you consider spreader slippage. But in my style of trading I'm happy to get 10 or 20 pips. With these small trades it is especially difficult because the spread can stack the odds very much against me.
There are a number of ways of measuring success. For me right now, any consistent and positive return would be fine. $10 a day on a $2000 balance would be fine by me.
Consider the fact that anywhere from 50% to 70% of trading today is automated. There some huge buildings with acres of very fast computers running sophisticated software and a lot of money. I think that these computers can sense any new patterns forming in the market, see where people are placing their trades, and destroy these patterns while making a profit. I know we rely on looking for patterns in the price action that we can program for. But I wonder if the price action is really an anti-pattern. In other words when a pattern starts to form, and people start trading that pattern, some very smart computer algorithm is right there to destroy the pattern and take the profits. What you think? Should our EAs be highly adaptive to the market conditions rather than look for a popular pattern in the price action?
Hi MisterDog,
I think your main question is about some super computer destroying pattern, not about winning EA.
You better have some evidence that these super computers destroy some patterns in market, coz to do that the super computers must have billions of money to trade in 4 trillions a day market. Its programmers may think like this, "because it's costly to destroy pattern, why don't we follow it ?". See ... ???
Programmer is human, human have sense - common and stupid one - and they hard code it into computer. Learn to analyze the market first and then later learn to program trading platforms - not the other way around.
:D
Onewithzachy, now you are ruining it for me. I had a great new excuse for why am not making money. It's all those damn supercomputers destroying the good patterns! ;-)
Oh my, I'm sorry, I guess I have to find you another excuse then !.
;D
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I would suspect that most of us at this forum do not yet have a winning program. Why? I don't think it's a lack of programming skills. The people at this forum are very generous in helping solve programming problems. Perhaps it's because we can't observe the market clearly enough to come up with the winning patterns. Or, what do you think the effect of thousands of computers running very sophisticated software has on our ability to develop a winning program? Is it possible that once a winning pattern starts to form these more sophisticated programs can detect the trading population’s investment in that pattern and destroy the profitability of that pattern? Should we be creating programs that sense and respond to changing market conditions?