Forex Alerts are three time more profitable than Forex EAs.
We recently tested our trad-able RSI EA using 2 approaches.
- The one approach was to let the EA run for a month on a continuous basis.
- The other approach was to stop the EA when an entry was identified and to manually revise the target and stop and even consider not trading. As if an alert was received.
In the end the manual revised alert approach profits were 312% higher and the success rate was also superior.
Why was that?
Expert Advisors
Firstly, one has to understand how EA settings are created. Most EA setting are created by back-trading the last 50 to 300 transactions to come up with 1 set of stops and targets for all say 300 transactions. Does that sound normal? Would you use the same stop and target for every transaction your entered for say 1 year? Also the settings are based on what worked perfectly in the past. There is no guarantee that the past will repeat itself.
So EA settings are optimised averages of what worked in the past. So no matter whether the market is trending, trading sideways, consolidating, near major support or resistance, near a major announcement, on a Friday afternoon etc. the EA would blindly enter use the same stop and target.
Amazingly some EAs are profitable in spite of all of that. So EAs can work.
Manual revision
So what if, rather than the EA starting to trade blindly every time an entry is identified you are given a chance to review the trading circumstances. You might be 10 minutes for the non-farms payroll announcement.
- Firstly, you can decide whether to trade or not and
- Secondly you can change the stop, target and following stops to be more appropriate to the current price action.
Making this small change improved profitability by 300% by not trading in unfavourable market conditions and also changing the stops and targets to be in-line with current price action during our test.
The decision
Clearly being able to review entries identified by you EA means that the trading is not 100% automated – very important to some people. The results have however a much better chance of being more profitable and having a higher success rate.
So it is a trading decision. 100% automation or having 300% more money to spend. It can be a difficult decision. What do you choose.