Forex System Creation: EAs and Strategy Testing (Part 2)

Filed under: Learn Forex Trading |

[…Continued]

 

The website that I know that does all of the work for you (with regards to EA building) can be found at:

 

http://sufx.core.t3-ism.net/ExpertAdvisorBuilder/index.html#Buy1

 

The site is fairly easy to use and understand, and if you don’t understand something, then there is a tutorial section on the website to talk you through how to use the platform.

 

When entering the site, you will be presented with a list of options, these being:

 

Template

Variables

Buy Strategy

Sell Strategy

Close (Buy Strategy)

Close (Sell Strategy)

Order Option

 

The ones to focus on are the buy and sell strategies (this is when you open your buy and sell orders) and the close strategies (which is obviously when you close your orders). The order option is also important if you want to set automatic stop losses.

 

By way of an example, I have just created a system to use as a demonstration. I created a buy only system, which buys when price closes above the upper level of a 350 period Bollinger band with a standard deviation of 2.5, and exits when it closes below the lower level of the Bollinger bands. I have run this on a 5-minute chart on the GBP/USD pair from February 2013 until the present (roughly 6 weeks of data). Here are the results in graph form (see Figure 1.).

 

Figure 1.

Figure 1.

As you can see, the results are not very good for this. However, by doing the opposite (selling when price closes above the upper level of a 350 period Bollinger band with a standard deviation of 2.5, and closing the trade when price closes below the lower level of the same Bollinger bands), you get the opposite result, and the system becomes profitable. If you don’t believe me – try it and see!

 

Of course, this is only a starting point for some research, and you should not trade with this system until much, much more testing has been done. However, it does adequately demonstrate how useful strategy testing software can be – and of course, if you do create a workable and profitable EA, you can then use it to trade automatically on a live account without ever lifting a finger!

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