Knowledge >> How to find a good trading robot

How to find a good trading robot

Buy my Forex Expert Advisor for $199 and get rich in a few months. This is what some EA sellers are telling us. The reality is not so perfect and many sellers are nothing but frauds. In this article I will describe several things to consider before buying a trading robot.

Never trust backtesting

I mean all those great looking charts that EA sellers are so proud of. They may or may not be real. Even if they are real, it is quite easy to build a robot which makes nice profits on historical market data by overly optimizing it. The fact that there is some profit when backtesting does not mean that there will be any profit in future. Only forward testing on live market can be taken seriously.

Track record on real account

Demo and real accounts are not always the same. There are differences in the speed of execution, requotes and slippage. It becomes particularly important when EA is scalping (trading very frequently and taking small profits).

How to verify if EA track record comes from a real account?

We can't, unless the seller is connected to a third party monitoring system. Best known ones are myfxbook and mql5.com signals. If the seller is trading a real account and is connected to the monitoring system, the track record looks much more legit.

At least 50-100 trades

It is required to have statistically meaningful results. Good results in 10 or 20 trades can be pure luck. Keeping good results in hundreds of trades is what makes a good strategy.

Long enough testing period

The testing period should contain at least one up trend, one down trend and a period of consolidation. If you only see results gathered during a strong trend, how can you know that the robot will work during a consolidation?

No Martingale

Beware of all kinds of Martingale and grid systems. I mean all strategies where the size of your overall position is increased when you lose. It can be done either by increasing the size of the next trade or by opening a bigger number of trades. Such systems can lead to huge drawdowns and will eventually wipe out your account. It is gambling and has nothing to do with money management.

Money management

This should be made public and well explained. I mean the risk and the rules of position sizing. While the rules of entering and exiting trades may remain a secret, EA users should know how much money is put at risk at any time. If the seller is hiding this information, we have the right to be suspicious. We do not want a Martingale system after all.

Contact with the seller

Is there any way to contact the seller?

Is it possible to post comments or questions?

Is the seller answering them?

Being totally anonymous is a bit suspicious, isn't it?

Google for 'scam' or 'fraud'

A simple Google search for 'EA_name scam' or 'EA_name fraud' can reveal the sad truth very quickly. Why not give it a try? Sometimes it can save you from being cheated.

Low drawdowns

Check what the worst historical drawdown was. I mean equity drawdown, not balance drawdown. The difference is that equity drawdown is updated almost every second, while balance drawdown is updated only when closing trades. Was it 20%, 40% or 70%? In my opinion, the maximal drawdown should not exceed 30-40%. Otherwise, it is too risky. Would you put more than half of your money at stake? Think about it.

Growth to drawdown ratio

Let's say that EA has earned 30% during testing period, but the worst equity drawdown was 50%. Not a good ratio. Why risk 50% to gain 30%? It is better to see something like 50% growth and 20% drawdown.

Scalping is risky

I do not say that scalping itself is too risky. I only want to say that scalping requires good trading conditions. I mean things like good execution time, reliable Internet connection, reliable broker, low slippage, low spreads and low transaction costs. Otherwise, you may not achieve the same results as advertised by the seller. A good piece of advice here is to trade with the same broker on the same type of account as the seller.

Test your new EA on demo first

Do no put your brand new EA on real account. Test it on demo account before going real. Do not hurry.