Xyzo Trade Robots

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What is an automatic trading system / Expert Advisor?

The Trade Robot is a so-called Expert Advisor (EA), also called automated trading system.

Such systems make autonomous buying and selling decisions and conduct them themself (fully automated Expert Advisor) or notify the trader who opens and closes the orders manually (semi automated trading system).

An automated trading system tries to predict future price developement from the course history. There, methods of technical analysis (chart analysis) are used. From the time-price-diagram (Chart) derived features are calculated
(indicators, such as moving averages, MACD, maximum, Cyber Cycle, Bollinger Band).

EAs are able to trade at markets such as Forex (foreign exchange), CFDs, metals and indices (eg DAX, Dow Jones).

Simple example: A EA based on the simple moving average indicator. This indicator is used for the extraction of a trend, i.e. the overall direction of price movement. A moving average smoothes the chart and reduces noise, i.e. small local oscillations, so that the overall movement direction is easily seen on a higher time scale. The intersection of two moving averages will be used for a sell / buy signal. A sell signal is triggered when a short moving average cuts a long one from below upwards.

Also an Expert Advisor can manage the amount of capital (money management), eg to risk based on a percentage.

 

What does a Trade Robot / Expert Advisor for you?


- Time savings. Routine work according to fixed rules is automated. 24 hours a day, tirelessly

- Faster response to reversals than with manual trading

- Unemotional, consistent and rigorous application of a proven strategy, based on scientific logic. No impulsive,

irrational decisions due to impatience, greed, anxiety, boredom or alleged intuition.

- Semi-automatic EA: Monitoring of orders and buy / sell alarms to the user, who manually places the orders

- Custom indicators can be intergrated

- Adjustable parameters, savable and automatically optimized to adapt to various markets and changing conditions.

 

How reliable and profitable is an automatic trading system?


Trading in CFDs, equities, derivatives, futures, Forex and other financial instruments is associated with the risk of total loss and additional loss. There are a number of causes for failure of an Expert Advisor. You should always test an Expert Advisor in back- and forward tests, with a demo account. See Risk Warning.

 

Inappropriate strategy

A bad, wrong or inaccurately formulated strategy (algorithm, rules for opening and closing of positions) is a possible cause of poor performance of a trading system.

Unsuitable Markets


A strategy that provides good results on one currency pair may perform poor on other values. Different values can show big differences in behaviour, at properties such as volatility or wave movements. Thus different values require specific strategies.


Suboptimal parameters


Even the best strategy fails, if the parameters (constants) are not closely tailored to the specific chart (for example, forex, EURUSD, 4-hour period). This can be optimized manually or automatically (in the MetaTrader Strategy Tester).

In the optimization of the parameters the problem of over-optimization (curve-fitting on) often arises. Then the trading system only succeeds on one time interval, but fails in others. Therefore the EA should be optimized for many different time periods and tested for others. Complex systems with many parameters are more prone to overfitting. A reasonably complex Expert Advisor with not too many nor too few parameters has the best ability to generalize (good performance even on not trained time intervals).

In particular, the percentage of the risk capital should not be too high. Although this reduces the possible gains but protects against total loss. (Money Management)

 

Programming errors


And last but not least, programming errors can lead to losses. I carry out the programming work to the best of my knowledge and belief and test thoroughly. Since it is impossible in principle, however, to test all possible situations, which can reveal subtle bugs, you should test in any case the system first.

 

 

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