HOW TO CREATE YOUR OWN FOREX TRADING STRATEGY?
Each trader reaches a point in his trading career where he or she wonders if it makes sense to automate his or her trading strategy. Hence all traders hope to create the Holy Grail EA and sell it all over the world to become wealthy. First of all, it’s not as easy as it sounds. An important question to ask yourself is “Why would I want to create a forex trading strategy?”. Besides the costs of creating a forex trading strategy, it is extremely time consuming. This article will try to answer the question if it is worth the effort and what steps to follow. I created many strategies myself and am more than happy to share my experiences.
I will write about the following topics:
What is the goal of creating your forex trading strategy?
This could be a THE question to answer first before moving forward. Basically there are two reasons for creating your trading strategy.
- To save yourself time
- To sell the strategy
The first reason is easy. Who doesn’t want to do other things instead of sitting in front of a screen for hours and make the same profits? For example, if you need 30 minutes each morning to determine an entry, wouldn’t it be great to have a forex ea doing that for you? In this case you can even enjoy your breakfast. Saving time is a good reason to automate your trading. Ensure that your strategy is really worth creating, since there are many proven forex eas on the market and you can purchase them at any time.
Selling the strategy is a bit more tricky. Expect additional work! Yes, you do save time on trading, but this time you will lose on providing support for your clients (buyers). If you have a day job, it’s highly recommended to offer your forex ea on a market place. In this way you can outsource things like marketing and payments. A good example is Myfxbook. As an unbiased EA platform iforexrobot is always interested in profitable forex eas and offer the same service. After your trading plan is ready, put it on paper!
Do you have a trading plan
Before starting to think about automation of your trading you need a trading plan. The best way to create this is to simply trade your strategy manually in a live account. As a result, this will give the most accurate numbers in terms of performance, risks, money management. Important is to trade exactly like the trading plan. So its important to rule out any emotions.
After you did let’s say a hundred trades over a period of time of a few months, you are good to go. This of course if you are happy with the results. I recommend to keep it simple. Try not to use too many entry triggers, since it will make the programming of the forex ea harder.
Determine specific trading rules
Basically this means that you should have considered all the trading rules that apply. This is the back bone of your trading strategy. Also, this is the part that an EA developer needs to be explained in detail.
You can think of;
- trade entries
- order types
- lot size
- which indicators to use
- stop loss level
- trailing stops
- take profits
- trading hours
- news events
Make sure you are very specific on this. Any forex trading strategy will mostly be reviewed on its risk settings, rather then its profits. Things like stop losses, lot sizes, maximum leverage, max draw down are important to insert in your trading script. In fact, this is the most important reason why traders want to buy your forex trading strategy. It’s not about the profits, but all about the risk settings.
Make a strategy description
I think after doing it myself this is key to create a successful trading strategy. Many expert advisors go out like a candle because of a bad description. This makes it very hard for and EA developer to write the correct code / trading rules. This part is hard since an EA developer does not know anything about your trading strategy. It’s like explaining your partner what a trailing stop is…not easy now is it?
I used to put all rules on paper and tried to write it down as how a computer thinks. For example:
If 20SMA crosses 200SMA then buy at market. Stop loss is 50 pips, Trailing stop 25 pips. Do not trade on Fridays. Etc etc.
Now many EA developers are used to “newbie strategy creators” but still, the less they need to be explained the better.
The money I have spent on EAs that never experienced a lift off is quiet a lot. Simply because i forgot about a few important trading terms that matter a lot for forex robots. Below a list of reminders that will hopefully prevent you from paying extra fees to your EA developer.
- Market gaps (gap filter)
- Spread filter
- News event filter
- Trailing stop ( many EA developers think differently about the trailing stop function
- Extensions (Check if your broker uses certain extensions before or after a currency pair. For example: USDCHF.c
- Power cut
- Using correct leverage (some brokers use different leverage)
- Debug filter – this allows you to see where the EA gives errors
- Hiding stop loss and take profit levels
- Put your own credential in the header or the developer will put his own there
Where can I find an EA programmer (mql4)
There are many platforms online where you can find a professional MQL programmer. Try to have a look at freelancer or upwork. Here you will find many qualified developers. I usually check references before i start. TIP: make sure the developer speaks your language and is responsive. In case you need help or a recommendation, lets me know. We selected a few professional mql4 developers willing to make the extra step and make your strategy work. More information you can find here.
How much does it cost?
An EA typically costs between $100 and $300. A lot of the price depends on how fast it needs to be delivered and how complicated your strategy is. Now I know that you can code any idea, but my experience is that when a strategy gets too complicated its getting harder to make it work. Check out our shop to see what the average prices are.
Each time you make an adjustment to your strategy, you will most probably be charged a fee. Depending on the relationship you have with the developer and maybe his mood, $30-$50 is easily charged. That is why the EA developer will ask you if you have provided him with the “final version” of your trading strategy.
Make sure you will also get the source code of the MQL file. Some EA developers like to charge you extra for this, which is ridiculous. It’s no extra work for them. You can recognize an mql file as shown below;
The left is the source code, the right the .ex file which is compiled.
In case you want to sell your strategy a compiled file is worthless, since you cannot account protect it or adjust the settings.
How to test the EA and see if all works?
Once you received your expert advisor file, you are ready to (back)test it. The typical way to do this is by using the strategy tester in MT4. This is free back test software. Always test your trading strategy in the visual mode. Read more.
After you are satisfied and bugs have been removed, you are ready to forward test your trading system in a live account. If this test is completed successfully as well, your EA is ready to go public.
The whole project usually takes 6 months, so make sure you are willing to spend all this time into it. Many professional traders made it easy for you by creating good strategies for you.
How to monetize a forex trading strategy?
Finally, if all forward tests went well and you feel comfortable trading the strategy, you are all set to monetize your ultimate forex trading strategy! Who knows, you might be listed as best forex robot! You can put it on sites like this one or any other platform. Also you can offer it to professional money managers. A good strategy will easily be sold thousands of times so you can do the math.
For many traders it’s the ultimate dream to have their own automated forex trading strategy. Only a few manage to walk through the full concept and to monetize their strategy. Because of this, make sure you are fully aware of the time and costs and moreover about the low success rate of developing a strategy. I don’t want to discourage you, but just to let you think thoroughly about it. Better safe than sorry. If you are seriously considering to move forward, simply try to find similar ideas online and see if they are willing to share their experiences. All I can say is that the feeling of having created a successful forex robot is the best! If you want to have additional information, please don’t hesitate to contact us.
Also read this post where you can check out live trading results.