One of the most essential tools that is required for all online traders is a trading platform. In simple terms, a trading platform is the software that allows them to access a trading terminal and actually execute trades in the market. Perhaps the most popular and widely known trading platform across almost all financial markets is MetaTrader 4 otherwise known as MT4. As we said it maintains its ever increasing popularity across various markets, but more markedly in the foreign exchange market or forex.
There are many reasons for its popularity among traders, one of which can definitely be its user-friendly interface and the fact that it is easy to understand and use. We also cannot forget to mention the features that make this trading platform stand out. Such features include the following:
Market data:
It provides users with real time and easy to see market data through its many charts and trading terminals.
Charting tools:
MetaTrader 4 provides users with many different tools so that they can graphically manage their trading charts and draw various analysis information on the chart to obtain the most reliable trends from the market data.
Indicators:
MetaTrader 4 comes equipped with many different built-in technical indicators. In fact, it has 30 built-in indicators that include a variety of different types of indicators including moving average and relative strength index.
Platform compatibility:
Another significant reason for the broad popularity of the MetaTrader 4 trading platform is the fact that it is compatible with various platforms, most notably mobile phones. This way traders can trade on the go, no matter where and no matter when.
Possibility of automated trading:
MetaTrader 4 offers traders the feature to automate the trading process through various means, most notably through the application and installation of expert advisors (EAs) on this trading platform. This is how MT4 bot trading becomes possible.
What is Bot Trading?
In the last section we discussed MT4 bot trading and we saw how it becomes possible through various means, most importantly through the installation of an algorithm known as an expert advisor on this trading platform. But let’s take a closer look at bot trading itself, its advantages, and also its risks.
Bot trading, otherwise known as automated trading, is when a trader would use a piece of code or algorithm to automate a part of the trading process of all of it. This is why this approach to trading is also known as algorithmic trading.
There are clear advantages to using automated trading. Many aspects of the trading process are extremely complicated and time consuming, and thus it would prove quite prudent to use a process of automation not only to make them easier but also to enhance the speed of execution.
All in all, we can consider the following major advantages for automated trading:
Higher speed:
One of the most important advantages of using bot trading or algorithmic trading is that such an approach to trading can be so much faster than manual trading.
Better efficiency:
Algorithmic trading can also be tremendously more efficient than manual trading. This is because there are so many moving components involved in the trading process, which can easily go wrong and become complicated for a manual trader, whereas an automated trading system can seamlessly carry them out.
More consistent trading:
Another huge upside to automated trading is that it can provide the trading process at a consistent rate. contrast this to a manual trader who is susceptible to many different internal and external factors that can easily impact the quality of trading. Of course an algorithm will carry out the same level of performance regardless of such factors.
No need to stop:
Another factor that is greatly in favor of automated trading is the fact that an algorithm can trade with no need to stop or take a break. This is of course quite the contrary for manual traders. Humans need to sleep and rest. For markets such as the foreign exchange market, where trading is virtually available around the clock, being able to trade all the time is a huge competitive edge.
Backtesting:
Unlike manual trading, when you are using an expert advisor or an algorithm for trading, you can actually test the strategy against historical market data before you actually use it. This way you can obtain a report on the performance of that trading strategy prior to exposing your actual assets to it.
How MT4 Supports Bot Trading:
Perhaps to better understand both the MetaTrader 4 trading platform and also its automated trading features, it would be better to see how this trading platform supports bot trading.
The answer can be found within the programming language known as MQL4. This programming language which stands for Meta Quotes Language 4, which is of course short for MQL4, is quite similar to another highly popular programming language C++.
The trading platform MetaTrader 4 supports the programming language MQL4 and this provides a way for traders and programmers to develop various forms of trading strategies and algorithms for trading on this platform.
The algorithms that are developed with the help of the MQL4 language for MT4 platform are known as expert advisors or EAs. An expert advisor is, as mentioned, an algorithm that has been developed to carry out various functions and performances that are related to trading.
With the help of expert advisors, the trading process can be automated to various degrees. This can be partial automation where we only see certain processes such as price and market analysis being carried out with expert advisors, or total automation where we see expert advisors carrying out the entire trading process on their own and managing the entire trading account. There are also other tools and methods that can be used to create and run trading bots.
Among them we can refer to customized technical indicators which can be added to the trading platform for the purpose of market and price analysis. As you know there are countless different technical analyses, with different functions. MT4 itself has a limited number of them. You can import your own indicators, which you have customized or even created for a specific form of price and market analysis.
There are also libraries that can be used to create code and algorithm components in order to develop an expert advisor. You can also use various types of debugging and compiler software that can help you test out the algorithm before applying it to the trading platform.
Building Your Own Trading Bot
MQL4 Basics:
As we discussed briefly above, MQL4 is a programming language not unlike other programming languages such as C++ that is compatible with the trading platform MetaTrader 4. As such traders can use this programming language to code their own algorithms that can be used as automated trading tools in MT4 bot trading.
Here we want to present you with some of the most basic syntax structures of this programming language so you can see just how easy it is for traders to develop their own trading strategies, indicators, and entire expert advisors.
- Bot Components: Breakdown of the core elements of an EA:
While there are many different types of expert advisors that are able to execute the trading process at varying degrees and with various capabilities, there are certain features and aspects that they all share. Here we want to take a look at the core elements of an expert advisor that include the following:
- Market analysis indicators: this is perhaps the crux of any expert advisor. Here we have technical indicators that are used to predict market and price patterns based on the currency status of the market and price movements. There are a great number of indicators that can fit into this element, including moving averages, relative strength index, among others.
- Entry and exit conditions: these elements include the use of various indicators or the information that is derived from them in order to calculate the most profitable entry points for your positions in the forex market, as well as the most secure exit points to lock in the accumulated profits.
- Money management rules: this aspect of an expert advisor has to do with how the algorithm is able to manage your trading capital the best way possible. This entails matters such as position sizing, which is related to how the EA determines the size of the positions, managing drawdown, etc.
- Order placement and management: last but not least, we have the order placement element of any expert advisor, which is related to how these algorithms manage placing orders with the help of different orders types in the market. these include various orders such as market orders, stop orders, limit orders, etc.
Step-by-step guide on writing MQL4 code for a basic trading strategy:
Testing and Optimization:
When it comes to the performance of an expert advisor, there are various forms of testing mechanisms that you can employ in order to make sure that the EA is up to the task and that it will yield optimal results under real conditions. In here we want to go over various forms of testing that can be applied to an expert advisor and also take a look at the optimization method which is important for the prop maintenance of the EA and making sure that it is performing as it should.
- Backtesting: this form of testing is when you expose the expert advisor to historical market data and see how it would have performed under those conditions had it been run against them. This way, you will receive a report for the backtesting and you will be able to see the performance of the expert advisor. This will help you gain valuable insight into the capabilities of the EA before actually using it with your real assets.
- Forward testing: this is another form of testing by an expert advisor whereby you are able to test out the EA not against historical data but against real time data. But this is still testing, so it doesn’t mean that you will use your real assets to test the EA. In fact, you will do so in a controlled environment such as a demo account, but the information that you receive from the market is real nonetheless and real time information.
- Optimization: this process involves the adjustments of the expert advisor’s setting before setting it active or after it. Expert advisors come with various forms of settings and parameters that can be adjusted and customized by the user, depending on the EA. The trader can set out to fine tune the expert advisor depending on their needs and the outcomes that they hope to achieve with the EA.
Using Pre-Built Trading Bots
While there are open source libraries and countless tools that enable traders to develop their own strategies and trading bots to be applied to trading platforms such as MetaTrader 4, still many traders choose to use pre-built trading bots. In this section we want to see how you can go about picking the right trading bot or expert advisor to get you on your way to becoming an automated trader in the forex market.
Finding Reliable Bots
There are both free bots and those available for purchase. Of course it is highly reasonable that free bots are much more limited in their range of capabilities compared with paid bots. But in either case, you ought to be able to get the bot from a reliable source.
There are many different sources that can offer you a trading bot for the forex market. For instance, there are bots available directly inside the MetaTrader 4 or 5 platforms. There are also countless bots for free and also for purchasing available on copy trading and social trading platforms, such as the community of the MQL5 platform or other forums.
Bot Selection Criteria
When you have your eyes set on a trading bot, you need to consider certain criteria for picking it. While there might be a plethora of factors that are involved in the ultimate profitability and success of automated trading solutions, there are a number of factors that are more important than others. These include matters such as the main trading strategy of the bot. This is highly important, because ultimately the way the bot will execute trades in the market will depend on its strategy.
There are also other factors such as the reputation of the bot and the developers behind it. You can go about checking these matters through user testimonials and their real experiences with the bot. Another highly important factor are the results of backtesting of the bot.
Installation and Setup
While there might be slight variations in how different expert advisors are installed and configured on MetaTrader 4, the gist of it all is pretty much the same. You download the EA, and then go to your MetaTrader 4, then follow the trajectory from File and then Open Data Folder and then you go to the MQL4 folder and open the folder known as Experts. That is where you ought to copy the files obtained from the expert advisor that you have downloaded. Now you ought to be able to find the expert advisor from MetaTrader 4.
Risk Management
No matter how well or capable an expert advisor has proven to be, either from its historical performance and reputation or through backtests, you ought to be very careful when you begin using expert advisors with your MetaTrader account. There are certain precautions that you can take in order to make sure that you have a reliable and profitable experience using the expert advisor. For this reason, you can have small beginnings and only use a small portion of your trading capital with the expert advisor initially.
Then you can slowly build up the capital that is at the disposal of the EA. As you build up the trust in using automation trading solutions, you also need to regularly monitor the EA by regular adjustments, configurations, and even if necessary, backtesting.
Advanced Bot Trading Topics
When you are well on your way to using MT4 bot trading with the help of an expert advisor, there are certain more advanced topics that concern this form of automated trading. In this section we are going to focus more on these topics and see how you can maintain using an expert advisor in the best way possible to obtain the highest degree of profitability.
Risk Management Strategies:
One of the significant factors that ensure your profitable experience of automated trading is through risk management. Now the concept of risk management in any financial markets, as well as the forex market, is a multi-faceted matter that entails various steps. Here we will touch upon the most important factors that are directly involved with successful risk management in bot trading:
Position sizing:
There are two main approaches that can help you with position sizing, which is very important and directly related to managing losses and drawdown. You can either leave the matter completely to the expert advisor, which of course depends on whether the expert advisor is capable of doing this or not.
An expert advisor such as XAUBOT is fully able to manage this aspect of risk management for you. The second route is to take matters into your own hands. If you want to manage position sizing manually, then you can either go with a fixed lot size which you can use for all of your positions, or you can calculate the size of your positions at various intervals during the trading process.
Stop loss:
Similar to position sizing, you can both automate the stop loss orders or carry them out manually. Of course doing this aspect of risk management manually seems rather counterproductive when you have opted for automated trading. So it would be best to pick an expert advisor that is fully capable of placing the right stop loss orders. Perhaps the best example is the expert advisor XAUBOT which lets you set hourly and daily stop losses, as well as trailing stop losses to make sure that your positions are not overly exposed to unfavorable market changes.
Take profit:
When it comes to risk management, the take profit orders are just as important as stop loss orders. While stop loss orders prevent your position from going into too much loss, take profit orders will help protect the profits that your position has accumulated in the market and will prevent them from getting lost.
Other risk management strategies:
As we said in the beginning of this section, risk management as a whole is a varied subject with multiple different factors involved in it. While you ought to do whatever it is that you can to protect your assets, there is always an extra step you can take. For instance, you can choose the approach known as hedging, which means opening a new position in order to balance the risks that might otherwise be associated with another simultaneously open position. You can also go with the route of diversification, which simply means you do not allocate all of your trading capital to the expert advisor or even to the same market.
Money Management:
Money management is ordinarily an approach that can ensure your long term presence in the market. As such it can act as an umbrella term for everything that you can do in order to make sure that your trading process is at an optimal balance of safety and risk so that your drawdown is controlled and you can keep trading in the market. There are two notable approaches to money management that are quite well-known in the world of trading and among seasoned traders. One is known as the martingale method and the other known as the anti-martingale approach. In the martingale approach, the size of each position is doubled whenever a loss is sustained.
This approach is continued until the position results in a win and this way because the size had been being doubled, then the eventual profits make up for all the previous losses. On the other hand, the anti-martingale approach is where you only double the size of the position whenever it already has resulted in a win. This approach is mainly about using your own profits for the trading process rather than keep injecting money into the trading cycle. Keep in mind there are other methods that are also involved in money management by traders and these were only two of the most notable methods used.
VPS Hosting:
An important aspect of successful running of an expert advisor is using a virtual private server. You can install the trading platform and by extension of course the expert advisor on your own private computer or any other device that you have at your disposal that supports the trading platform. But of course with that comes the risk of outages of any kinds, including power outages that could altogether shut down your computer device or internet outage that shuts off the access of your device to the internet and thus the trading terminals.
To counter such issues, you can use virtual private servers or VPS. A virtual private server is a storage space you essentially borrow from a third party server provider. You then install your trading platform, for instance MetaTrader 4, on the space that is provided to you by the VPS provider and then of course the expert advisor is also installed on the same space. In this way, your MT4 trading bot will have uninterrupted access to the internet and the market all the time.
Error Handling and Debugging:
One final and important aspect of maintaining MT4 bot trading is through handling any probable bug in the process and the proper debugging. Of course for doing so you need to heavily rely on the development team behind the expert advisor. You can report any and all bugs that you happen to encounter with the expert advisor to the developer team and they will of course provide you with ways to solve them. Another important factor in this regard is installing all the updates that are also provided by the platform from which you acquired the expert advisor.
Other feathers
Metatrader 4 is a popular trading platform used for forex and other financial markets. It allows traders to automate their trading strategies using Expert Advisors (EAs). Prop firms provide traders with capital to trade in the financial markets. They often use Metatrader 4 and allow traders to use their own EAs
Conclusion
One of the best ways that can yield sustainable profitability in the forex market is through MT4 bot trading. This is the approach to trading whereby you employ an algorithmic method or bot to execute trades in the forex market. The algorithms that are installed on the trading platform MetaTrader 4 are known as expert advisors or EAs. Expert advisors are developed through various means but mostly with the help of the programming language known as MQL4 which is the programming language compatible with the trading platform MetaTrader.
In this article we discussed all the different aspects involved in MT4 bot trading, including the fundamentals and definitions, all the way to how expert advisors are developed, how you can go about picking the right EAs, and maintaining the profitable usage of EAs with your MetaTrader account.
