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Do you believe in EA trading?

  • #21
  • Dec 21, 2008 5:49pm Dec 21, 2008 5:49pm
Quoting Gaston
Like many things in trading, EA's are blown way out of proportion....

I would respectfully disagree on some points. The purpose of ea's for me is that I have a day job which means I don't have the stress of trading full time or failure. 2nd, ea's are 100% more psychologically trained to be affective. I can't trade manually because I would be a basket case and cut wins short.; however I have no problem waking up in the morning checking to see the take. I do
agree that people do put there faith in these systems--- and blow out with ea's.. However, I also think that there a ton of lazy people out there that want a freebee and don't do the trading work necessary to build a successful ea. Ive been on this forum for 2 year and another for 4 ...I have offered training services for years. I have yet to have one taker.!. Not a single one - because I think most folks are just plain lazy. I hear newbees' saying they will do what it takes? BUNK. Are folks willing to study elliot wave patterns until there brains are fried? or
pivot points? or rsi? or turn their indicators upside down? or go through candle patterns to understand the best turns? or learn to program all possiblities of a trade and have the levels built into the ea? ...no, most are not; in fact - I would state that maybe 1 out of a 100 are. that's just the way it is. I certainly, understand why folks don't believe ea's work. Ive burned through so many that I have a file with over 100 mb of just stuff tested...but that is part of the price that others don't do. Most don't have a passion for trading or building ea's so they fail and they fail badly.
  • #22
  • Jan 28, 2009 8:24am Jan 28, 2009 8:24am
Hi,

I find it weird to trade without an EA now but my EA needs me to function properly. I choose the direction I would like the EA to trade in based on my analysis and it picks optimum entries based on that. It is by no means perfect but it is better than what I am able to do manually.

Thanks

Jay
  • #23
  • Jan 28, 2009 9:26am Jan 28, 2009 9:26am
Quoting BlackMage
Regarding the concept of "EA"'s, there are very successfull quant funds and propertiary trading firms which operates completely automated strategies, but they are certanly not using Metatrader and they don't trade "when the blue line crosses the red line" types of trading systems which are mostly found on forums like FF.
I would have previously agreed with you but now I have come to realize that statements like this are just plain false.

If you read Market Wizards or any other interview with LONG TERM successful traders, they all center around the same things:

  1. Be in it for the long term
  2. Dont go against the trend
  3. Profitable trading is very boring (but VERY profitable)

Honestly, when I think about the black-box systems, I wonder if they're just BS'ing me because they dont want other people to realize how simple it is to make money that they intentionally make it complex (or at least sound complex). Sometimes, it is as simple as "trade when this line crosses that line" as with MAs. Why does everyone feel like profitable trading needs to be complex?

  • #24
  • Jan 28, 2009 10:46am Jan 28, 2009 10:46am
What if both are best? Sounds like it’s possible for ‘multiple bests’. Then, the question becomes: “How can I know which is ‘best for me’? My experience with myself, and traders, has taught me that it comes down to being able to ID your natural interest and whether it is strong enough to take you through the long, hard learning curve (of either) to master the skill of consistently profitable trading. Traders with strong, left-brained skills in logical thinking and math, tend to persist through the learning curve’s discomfort and master EA trading. Traders with strong, right-brained skills in visual-spatial thinking; tend to persist through the learning curve’s discomfort and master discretionary trading. It seems to be a case of: “Different strokes for different folks.”
Mind Power Magnetizes Market Profits!
  • #25
  • Jan 28, 2009 4:04pm Jan 28, 2009 4:04pm
I believe that fully mechanical systems do work. And as an extension of that, EAs also do work (of course, only if they are coded properly to effectively emulate a effective mechanical system).

However, I think that most new traders have overblown expectations out of both mechanical systems and EAs.

All mechanical systems will fail. I don't think that there has been a single fully mechanical system that has stood the test of time without experiencing periods of drawdowns that would blow your account. Why? Because the market is ALWAYS changing. And as soon as the current market conditions change too much from the original market conditions that the system was based on, it will fail.

With that being said, many successful traders use mechanical systems. In fact, many professional trading firms hire a ton of programmers to continously program new automated trading systems. But thats the point, they have the ability to create new systems as older systems start experiencing drawdowns. They also have the knowledgebase and discipline to realize when market conditions will most likely degrade their current system and will replace it with a new one.

So in conclusion, systems do work if the trader realizes fully that at some point they will fail and is willing to replace it with something else. Anyone who buys/creates a system expecting it to make money for them for years to come will be inevitably fail.
  • #26
  • Jan 28, 2009 4:25pm Jan 28, 2009 4:25pm
Quoting Lamdun
I believe that fully mechanical systems do work. And as an extension of that, EAs also do work (of course, only if they are coded properly to effectively emulate a effective mechanical system).

However, I think that most new traders have overblown expectations out of both mechanical systems and EAs.
I may not fully agree with your conclusion, but I definitely agree with your premise. Very, very few people that I have seen on these boards have the patience to wait to make money with Forex. EVERYONE wants to make money today, not next month, not tomorrow, like right now! I think so many newbies get washed out of this business simply because they didn't give themselves enough of a chance to survive in it. Everyone wants to make 50% each day with no risk, not realizing that 20% over a year will make you a rock star on Wall Street The expectations that people bring to Forex are just insane.
  • #27
  • Jan 28, 2009 5:04pm Jan 28, 2009 5:04pm
for me the biggest problem is broker most my trading in manual have a good result but when go auto, things go wrong mostly because ea work faster and more than me than i might be have problem with my broker server
  • #28
  • Jan 29, 2009 6:26am Jan 29, 2009 6:26am
I think this is actually a very deep question. Basically what we are asking is can a profitable system be programmed and run by a computer, or is that impossible?

Is there some element of intuition/imagination/creativity required? If you take a successful discretionary trader, is it possible to precisely write down all of what goes on in his head and program it for a computer? Could a computer do the same thing? Could it do it better than a human?

It's similar to the problem about the foundations of pure mathematics. Is math just a formal game of symbols drawn on paper? Could there one day be a machine that could automatically prove all the theorems of mathematics by systematically trying and testing all kinds of different combinations of symbols? Or is imagination and creativity ultimately required? Godel answered that question. It turns out that no such machine will ever exist. In any formal system, there will always be some theorems that are true, but that cannot be proven from within that system. (Godel's Incompleteness theorem)

It is also similar to the famous chess battle between Kasporov and Deep Blue, man vs. machine. We all know the outcome of that. The machine eventually won.

Now here is a simple way we might be able to get some answers: Has anyone here ever used an EA that was profitable for a long time? Has it consistently pulled profits out of the market? If so, for how long? Be honest. Of course there can't be any changes to the system over that time. There can't be several systems where the trader chooses which one to use today. The trader is not allowed to keep changing which currency pairs to use. The trader cannot even choose whether to turn it on or off (unless this is not actually a choice but a perfectly repeating pattern, e.g. always turn it on at 8:00 AM and turn it off at 5:00 PM)...All of those situations would require human intervention. That would be discretionary, not purely automated trading.

As far as those EA contests are concerned, I don't think a couple months is nearly long enough for those results to be considered reliable. I think we need continued success for years. I'm certainly not saying that every trade must be profitable. However, in general, it should be net positive over a range of several years, and net positive over each year (or most years) within that range.
  • #29
  • Jan 29, 2009 7:19am Jan 29, 2009 7:19am
nice post mathematician,

Quoting mathematician
I think this is actually a very deep question. Basically what we are asking is can a profitable system be programmed and run by a computer, or is that impossible?
....

Of course there can't be any changes to the system over that time. There can't be several systems where the trader chooses which one to use today. The trader is not allowed to keep changing which currency pairs to use.

> Basically what we are asking is can a profitable system be programmed and run by a computer, or is that impossible?
I would say YES it can be done. I would even say: Most (if not all) profitable system can be programmed and run by a computer.
(maybe not by me and not by MT4 but basically yes)

But the whole question goes a bit deeper:

What is a 'trading system'??

And exactly here is the question (no matter of manual trading or automatized) : What is a 'trading system'.

> Of course there can't be any changes to the system over that time.
is mathematician definition right ?

> The trader is not allowed to keep changing which currency pairs to use
But there could be a more complexed system which has this included as part of it.


CONCLUSION: One must ask first: is there at all a profitable trading system (no matter how complex it is)?

If the answer is yes: I believe it can be programmed ( at least most of such existing systems)
__Thanks__ MJ
  • #30
  • Jan 29, 2009 7:51am Jan 29, 2009 7:51am
Quoting M_j
nice post mathematician,
> Of course there can't be any changes to the system over that time.
is mathematician definition right ?

> The trader is not allowed to keep changing which currency pairs to use
But there could be a more complexed system which has this included as part of it.
Yes, that is what I mean. If, for example, there ARE rules that the trader is using to decide which currency pairs to use (maybe based on some price action in the chart), then those rules should be part of the program. So the program can be as complex as necessary, but it must be completely computer-run.

Basically I'm just saying that if there is any aspect where a human makes a decision, then it's not a 100% mechanical system; it's discretionary.
  • #31
  • Jan 29, 2009 8:25am Jan 29, 2009 8:25am
Quoting M_j
CONCLUSION: One must ask first: is there at all a profitable trading system (no matter how complex it is)?

If the answer is yes: I believe it can be programmed ( at least most of such existing systems)
I'll do you one better, I've already programmed it

The answer to your first question, yes, a profitable system does exist and it's VERY simple to understand. Read up on Richard Dennis and you'll see.

Yes, it can be programmed. Its actually ideal for it because you need to have discipline with profitable systems and that's what using a computer is best for. You can find my profitable EA at: http://www.forexfactory.com/showthread.php?t=143250
  • #32
  • Jan 29, 2009 8:53am Jan 29, 2009 8:53am
> Of course there can't be any changes to the system over that time.
is mathematician definition right ?

Quoting mathematician
Yes, that is what I mean.
I also think you are right. But what I more exactly mean: does any manual trade have by this definition a 'profitable system'.

Properly most traders no: as they all like to change and adapt there so called systems ;-)

Quoting LongToBeFree
I'll do you one better, I've already programmed it

The answer to your first question, yes, a profitable system does exist and it's VERY simple to understand. Read up on Richard Dennis and you'll see.

...
Thanks, I also did.

But to keep the fact together:
It could happen that in the future your (or my or any) system fails to be profitable.

All of us can just talk about profitability from past experiences (manual or automatized trader the same)
In the end it always come down to probabilities as no human knows the future for sure.

And exactly at this probability question: I think believing in EA trading is reasonable. (but might not be always the most profitable solution)
__Thanks__ MJ
  • #33
  • Feb 3, 2009 1:45pm Feb 3, 2009 1:45pm
Quote
People who pay for automatic trading systems are like medieval knights who paid alchemistsfor the secret of turning solid metal into gold

Quote
Betting your money on a aoutomatic system is like betting yourself on an autopilot. The unexpected event will destroy your account.

Quote
The market is not your mother. It consists of though men and women who look for ways to make money away from you instead of pouring milk into your mouth.

Alexander Elder - Trading for a Living
  • #34
  • Feb 4, 2009 6:26am Feb 4, 2009 6:26am
In my opinion, effective EA that works in all market condition needs few trading strategies working in unison, to reduce the volatility and if possible with self adapting algorithms that select the best strategies to be used.
No single strategy is perfect...
However it costs a bomb to get such EA (yes they exist, look at mql4 championships). So far my investment in one of them is really worth...
Adaptive autotrading is the future...
  • #35
  • Feb 5, 2009 6:04pm Feb 5, 2009 6:04pm
all market conditions? close to impossible. I mean, sometimes the market just goes opposite of just about any rational thought. Hits a peak and dies or turns or does some funky stuff. Thats where a computer can't beat. It happens - quite a bit - I think. Also, get caught on a major turn...not easy.
That is a traders holy grail. Tell me if it will hit the next top or bottom? not too easy .
  • #36
  • Feb 5, 2009 8:12pm Feb 5, 2009 8:12pm
Trading profitably in all market condition is near to possible. It's not about finding the top or bottom or use of subjective decision criteria/forecast, but how a system copes with loss and readjust accordingly, basically it's money management.

For example, if you take most of the EAs, they can be optimized to almost all conditions to perform well. The challenge is to get them to re-adjust themselves at the right time, example would be adjusting the TP/SL. Or some of the EAs just switch between systems according to pre set criteria, or just use a few complementing strategies.

Personally, I am unable to adjust/judge the market accordingly but using some EAs, though not perfect, trading in all market conditions is possible so far. Not to mention the emotions/undecisiveness involved. Perhaps backtest way back since 2000 can be done to see how a system adapts, as I think 2008 completes the 'all markets' criteria in all currency pairs due to the unseen volatility and almost impossible short term predictions/forecasts.
Adaptive autotrading is the future...
  • #37
  • Feb 5, 2009 8:48pm Feb 5, 2009 8:48pm
They can be profitable if you can teach them price action and can trade different time frames simultaneously. This one Ive been working on trades strictly from price action...no indicators. I made some bad adjustments midway through the week and gave it too much money to start with but its responding very well now. Previous tests were very good. It is possible.
Attached File(s)
File Type: xls Spitfire_MK_1.xls   59 KB | 276 downloads
  • #38
  • Feb 7, 2009 3:55am Feb 7, 2009 3:55am
Quoting JShannon
They can be profitable if you can teach them price action and can trade different time frames simultaneously. This one Ive been working on trades strictly from price action...no indicators. I made some bad adjustments midway through the week and gave it too much money to start with but its responding very well now. Previous tests were very good. It is possible.
congrats! care to share or at least give us a hint?
change the future, not the past
  • #39
  • Feb 7, 2009 4:02am Feb 7, 2009 4:02am
no.

market are changing beats, ea can help for manual trading, but any of those will blow an account on long period.

have fun!
  • #40
  • Feb 8, 2009 5:42am Feb 8, 2009 5:42am
If a EA has been tested properly (90% modelling quality and few mismatch errors and the trades confirmed visually on charts) for at least few yrs, or 8 yrs as we have the data (2000-2008), and they yield profit in the end, that EA should be able to perform in the long run. Though on live trading it may not be 100% the same, even 80-90% accuracy as in backtest should suffice for it to be profitable. There are EAs that have performed well for past 2-3 yrs, for longer term performance we just need to wait and see. I don't think its fair to judge too early. And we don't have enough data to prematurely say that EAs don't work in long term...
Adaptive autotrading is the future...
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