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Automated trading

Concept of "trading robot" and its Forex trading peculiarities. Strategy testing

We have already mentioned the difficulties a trader may bump into whilst working at Forex in the section IV dealing with the psychology of trading. The existence itself of those difficulties gives rise to an argument about who can achieve better trading results: a human or a trading robot.

A person trading in  the market may be exposed to emotions and mood swings. He/she may be affected by his/her health condition, tiredness, external information (news, rumours, analytical data), and so on. This is a never-ending list. Another powerful influence is excessive self-confidence that may overwhelm beginner traders right after the first success and ruin further results. However, human intelligence, expertise and a creative (in a good sense of the word) approach to work are positive counter factors.

Computers are currently unfit to perform creative work and developments in the AI sphere generally look quite poor as compared with what a human brain is capable of. Nevertheless, the computer possesses a few indisputable advantages: it can work stably a long time, it does not require a rest or sleep, nor does it make emotional decisions. Its actions are fully and implicitly based on a pre-set algorithm which corresponds in its turn to a certain behavioural market pattern.

A trading robot (Automatic Trading System, or Expert Advisor (EA)) is a computer program developed in a dedicated programming or general-purpose language (for example, MQL4, MQL5, Easy Language, Qpile or other languages embedded in trading platforms, С++, C#, Delphi, Visual Basic, and the like). If the language is built in the trading platform, it can directly use all the features of the platform for conducting trades. In order to program in a general-purpose language, a trader will require an application programming interface (API) provided by some brokerage companies. The LiteForex company offers its clients MetaTrader 4 and MetaTrader 5 platforms that use MQL4 and MQL5 languages, respectively. This allows a programmer to directly access all the features of the trading platform and carry out any trades without using any other mechanisms, such as bridges, connectors, and the like.

The most important peculiarity of a trading robot's operation is that its program/strategy can be tested on historical data, i.e. we can model the way the strategy would have worked in the past and assess the results of such work. Undoubtedly, the profitability of a strategy in the past does not guarantee future profitability. However, backtesting allows us to estimate to a certain extent potential profitability and the risks involved in a strategy. Statistical data help us decide on the volume of investment we can entrust to this strategy. From this point of view we can say that a trading robot does not make a market forecast but realizes a statistical advantage of the embedded trading strategy. It's worth mentioning that the strategy work modelling for the past may involve errors and therefore should not be considered to be absolutely correct.

In case test results prove positive and suitable for a trader, he/she may allow the robot to trade on a real account. The LiteForex company provides a VPS (virtual private server) service which can place a trading robot on a remote computer. You won't even have to keep your computer turned on because all the work will be conducted on LiteForex's server.

With such a powerful toolkit (VPS + EA), you can fully automate your trading strategy on the Forex market. As we've mentioned it earlier, your trading robot can be placed on LiteForex's server (or you may use any other company's service, or use your own PC. In the latter case, remember to make sure your PC is always on and your Internet connection is failure-free.) So, we regard the issue of trading robot placement as purely technical. The process of developing a trading robot is examined in the next section.