Optimizing Your Expert Advisor for Maximum Profitability

Expert advisors are playing a more and more significant and defining role in the world of forex trading. They provide a way for users to automate the process and trading and also be able to fine-tune and adjust this automation method in the best way possible. Of course the power of these tools can be quite extensive and their capabilities can be far reaching.

The point is for the trader to be able to get that performance out of the expert advisor. To this end, you need to know how to optimize your expert advisor. In this article we are going to take a look at this notion and show you how you can go about optimizing your EA to get the maximum profitability. 

Understanding the Underlying Foundations of Expert Advisors

Of course, before you are able to actually optimize your expert advisor, you need to familiarize yourself with the fundamental configuration behind any expert advisor. This means you need to understand what creates the foundations of an EA. 

Furthermore, depending on the specific expert advisor, their underlying components and configurations can be quite different. Regardless of  differences, the following can be regarded as the underlying foundations of any EA. In order to begin optimizing the EA, you need to fully understand these and also understand how you want to change them to achieve optimization. 

1. Trading Strategy: first of all, you need to understand the main trading strategy that your expert advisor uses in the process of trading. Some expert advisors are only capable of executing one trading strategy. While there are other expert advisors that are capable of offering more than just one strategy. A good example is our EA (XAUBOT), which offers both the scalping method and also the multi-level trading approach. 

Depending on the strategy, you either will want to switch between the trading strategies or if not possible then adjust that single strategy. 

1. Market Conditions: this is yet another important underlying factor of any expert advisor which plays an important role in how you are able to optimize your expert advisor.  You need to find out how the expert advisor is able to react to market conditions, such as when the market is trending or not. 

Also you need to find out whether your expert advisor is able to handle economic events and fundamental factors, and how to configure them. Yet again a good example here is the XAUBOT which is able to provide certain features to users to manage fundamental factors by stopping the trading process before and after such events. 

1. Risk Management: this is another area where you can have a significant degree of optimization and fine tuning. Although the extent of this optimization will ultimately be bound to the specific expert advisor. But in an ideal situation, you should be able to configure various aspects of risk management, such as orders like stop loss, take profit, and even the amount of drawdown you want your trading account to sustain. 

Steps to Optimize Your Expert Advisor

• Always Begin with Backtesting

It is quite understandable why you need to begin with backtesting your expert advisor first. When you want to adjust and optimize any system, you first need to understand how the system performs and where its potential weaknesses may be found. The process of backtesting will provide you with exactly that chance.  When you expose your EA to historical market data and obtain the report, you can see how its performance is with those market data and then set out to optimize it according to the report. 

Though remember that because of the importance that the results of the backtesting process have in the optimization process of the expert advisor, you need to execute this testing in such a way that the results are most reliable. Consider the following points for this purpose: 

• Use Quality Data: the data that you feed to the testing process in a backtest is the most important part of the whole process. If your data is not quality data, then the results will be quite less reliable.  Therefore, make sure that you use high quality data such as tick data or minute data to make sure that the results are as close to reality as possible. 
• Optimize Settings: aside from the actual data that you feed to the backtesting process, the settings of the testing process are also significantly important and defining with respect to the final results. Make sure to input the setting as they would be in actuality and when the expert advisor is actually active and running. This includes factors such as setting realistic degrees for stop loss and take profit levels. 
• Analyze Results: finally, it is time to analyze the report that you have obtained from the backtesting process. In order to make sure that you have indeed obtained the right info from the report, you need to look for important metrics such as the win loss ratio, drawdown, etc. 

At this point, you should be ready to carry out the optimization process of the expert advisor provided that you have obtained the necessary information from the backtesting phase of this process. 

• Optimization of Features

This is where you would be doing most of the optimization and configuration of the expert advisor. But keep in mind that this process and this phase of the optimization will totally be related to the actual and specific expert advisor that you are using. Naturally, some might offer more and some might offer less room for optimization.  

This is actually quite an important distinction between the available expert advisors in the market. You should make sure to opt for an EA that allows traders enough room and space to make adjustments. 

So check out what your EA allows you to change, and then do so. This can include making changes to the thresholds and levels for orders such as stop loss, take profit, and also defining the threshold for the drawdown allowed on your trading account. 

• Forward Testing

So far, we have completed the crux of the optimization process through two phases of testing and then optimization based on that testing’s results. Now it is time to conduct what is known as forward testing. 

Forward testing is a process that is rather similar to backtesting, with the difference that you do not feed the testing process with historical data. Instead, you ought to use real-time information – hence the name forward testing. 

But this does not mean you should take the expert advisor to the market and use your real assets with it. It wouldn’t even be called testing in that situation. Testing should be done in a controlled environment. 

This is exactly why forward testing is recommended to be carried out with the help of a demo account. In demo trading, the data that is fed to the account are real data and can even be considered almost real-time data. There is only a slight delay between the time market data actually manifests itself and is then presented in the demo account. 

When you are performing the forward testing process, make sure to be quite vigilant and observe the operations at all times. Then you can rely on the performance on the EA to make any other required optimization before real trading. 

• Risk Management

Although we have discussed the process of optimization, risk management should get its own section because of its huge importance. 

While risk management is closely tied to your trading goals and expectations, trading strategy of the expert advisor, so on and so forth, there are factors that should be considered no matter what. For instance, when it comes to position sizing, a general rule of thumb is not to risk more than 1% or 2% of your trading capital in any given position. 

• Do Not Neglect Updates and Maintenance

There are also actions that you need to take post optimization of your expert advisor. These are mostly related to upkeep and maintenance, which itself is a multi-pronged approach. These include making sure that you receive and download all the updates provided by the developing platform on time and correctly. 

Furthermore, you need to make sure that you remain vigilant and observant of the performance of EA. Market conditions change all the time and you cannot simply rely on a fixed configuration. By observing the performance of your EA you can make further optimizations that fit the new market conditions. 

• Take Advantage of Trading Communities

Finally, another means of continued optimization of your expert advisor is to take advantage of the available trading communities. They can provide you with highly valuable information about the performance of your expert advisor from their point of view and given their own unique trading goals. This way they can provide you with insightful tips on how to optimize the expert advisor. And of course you can take the bits that are relevant to your situation and your trading expectations and goals.