Discussing the article: "Build Self Optimizing Expert Advisors in MQL5 (Part 6): Stop Out Prevention"
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Check out the new article: Build Self Optimizing Expert Advisors in MQL5 (Part 6): Stop Out Prevention.
Join us in our discussion today as we look for an algorithmic procedure to minimize the total number of times we get stopped out of winning trades. The problem we faced is significantly challenging, and most solutions given in community discussions lack set and fixed rules. Our algorithmic approach to solving the problem increased the profitability of our trades and reduced our average loss per trade. However, there are further advancements to be made to completely filter out all trades that will be stopped out, our solution is a good first step for anyone to try.
It is possible for traders to correctly predict the future change in price of a market, but close their positions in a loss. In trading circles, this is commonly referred to as “Getting stopped out”. This problem arises from the fact that price levels do not change in straight and predictable lines.
In Fig 1, we have provided you with a snapshot of the hourly change in price of the EURUSD pair. The white, dashed vertical lines, mark the beginning and end of the trading day. A trader, who was confident that price levels were going to fall that day, would’ve correctly predicted the future change in price. Unfortunately, price levels rose considerably, before they fell, meaning that if our trader’s stop loss was within the red zone highlighted in Fig 1, he would’ve closed his position in loss, after correctly predicting the future change in price.
Author: Gamuchirai Zororo Ndawana