Automated trading comes with its fair share of risks and for traders who have just started investing in the Forex market, handling them is not easy. You can take some steps, nevertheless, to enhance the performance of your expert advisor. By following some simple tips and doing some research at your end, you can make it perform well in live trading situations.
Here are some tips you can follow to improve your automated Forex trading strategy.
1. Keep Things Simple
It is important to remember that the simplest of strategies sometimes perform better than their peers and allow you to make large profits in the Forex market. If you’re still a small player making their foray into the market, it is unwise to build a complicated strategy. You should start with a simple strategy using just a few indicators and criteria, slowly adding more elements thenceforth.
This also allows you to know your strategy better, making small improvements over time so that your strategy is not solely based on archival data. But, at the same time, you should ask yourself if you have a plan B in case your strategy gets tangled up in an outbreak. The Forex market often sees sudden and drastic changes, so while keeping things uncomplicated is important, you should have measures in place that let you execute your exit strategy.
2. Know Your System
While engaging in automated trading, you should have a clear understanding of how your strategy works. Several individuals enter the Forex market blindly, making investments without knowing what will be done by the automated system they created. If you wish to succeed, you must know all the trading rules your system works on, so you can assess its performance objectively.
Of course, it is difficult to find a strategy with the perfect history, in case you are using one built by someone else. Remember, if the Forex strategy was perfect, the developer wouldn’t sell it to others, so if you have any unrealistic dreams about discovering an EA that has a near-perfect success rate, it is time to let them go. With some thorough research, you can come across a Forex robot offering a success rate exceeding 50% so that you can keep your losses to a minimum.
If you have the necessary skills, it is always better to build your own trading system. When you do this, you know if the trades being carried out are following the filters you installed. In the unfortunate event that your strategy ends up failing and you suffer from losses, you cannot tweak your system to make it better if you have no idea about its operations.
3. Check out the market conditions
Not every strategy is suitable for every market, and you need to know which environment gives your strategy the best chance to succeed. While trading in the Forex market, you should target a specific market and formulate a strategy that works for it. Many strategies fail because they cannot adjust themselves according to the shift in market specifics.
For instance, if you are trading Forex based on trend, you should use a robot that is programmed to work well in trending markets.
4. Increase your profits by adding certain filters
In certain situations, you can use filters to enhance the profit-making capabilities of your automated Forex trading strategy. You can instruct it to trade for a certain time period every day or keep in line with the overall trend. Another great filter to add is to collect the profit whenever it appears, so you are guaranteed to make some money every day.
5. Monitor your trading performance
Forex EA developers often tend to build a system using historical data and as such, you should test it in the market for some time, which will increase its chances of success. Having your system based on several years’ worth of archival data gives you the confidence you need to use it in a live scenario.
This way you get to know everything about the Forex robot and can also determine why it succeeds or fails so you can adjust it as needed. While analyzing your strategy, you have to look beyond the individual transactions. Since you will be taking part in several thousand trades, you should have an idea about the bigger picture as opposed to being fixated on the minute details of every single trade.
While judging your strategy’s performance, take several trades at once to check whether it caused any changes in price shifts. You can also draw a comparison between two different strategies based on factors like total gains, sorting ratio, number of trades won, etc.
6. Demo test your Forex robot
A golden rule of trading in the Forex market is never to use a new strategy on a live account. It may be that you dishing out large amounts each month as a subscription fee for your Forex EA, but you should still test it on a demo account to see how efficacious it is and if it can bring you large gains. Although it may seem like an unnecessary expenditure, you should spend some money trying out several robots using a demo account and comparing their performance.
When you are making a large deal in the Forex market, you don’t want to take too many risks. Demo testing lets you measure the effectiveness of your strategy without suffering from any losses whatsoever. You should also check out the statistics generated by the robot in regards to yearly return, total profit, measures to deal with a volatile market, etc.
Following the above-mentioned tips will let you optimize your automated Forex trading strategy, allowing you to point out the pros and cons. This will bring you long-term benefits and help you formulate the ultimate strategy based on the market conditions.