3 Steps To Achieving Consistent Profits With An Expert Advisor...

We have to take a step back and think about if this statement is possible at all.

Personally, I have forward tested more than 5 expert advisors in demo accounts. After some time, I decided on running the most promising one on a live account. Right after I set up everything, funded live account and leased the expert advisor and all, I saw reports from a very popular forum that people had suffered up to 80% losses in their accounts almost overnight...when the expert advisor was catching the correct tops and bottoms and making phenomenal profits for the last few months or so. This has really shaken my belief about expert advisors.

Kathy Lien mentioned at one of her seminars that she used to work in big banks and she revealed that banks are spending millions of dollars to find the "switch".  A "switch" that will allow their sophistically developed trading software to switch between trend trading strategies and range trading strategies as the markets alternate between the two states.

William Boatright (2nd runner-up in Autmoated Trading Championships 2007), mentioned in an interview that when he tried to optimize his expert advisor for trading trends, it would not perform as well for trading ranges and vice versa.

Another clue would be...have you ever wondered why there are so many discussions and forums on the Internet actively engaging to find THE expert advisor? And those people have been evaluating experts advisors after expert advisors for so many years already...

Having said that, I still believe it is still possible to achieve consistent profits with expert advisors. Below are the 3 essential steps on how to do it:

1. Still be able to do market analysis manually - pull out your indicators, watch the supports and resistances and the candlestick patterns...you must be able to tell if the market is trending or ranging in the first place.


2. Understand how the expert advisor works - for 2 reasons. Firstly, so that you know when you can deploy the expert advisor (remember, they don't work in all conditions). Secondly, so that you can intervene when necessary. That is, you would want to close all the positions earlier (be it in profit or losses) when the market is entering a stage which the expert advisor will not perform well. I termed this "cyborg trading" - half man, half machine :-P


3. Optimize the expert advisor regularly - another reason for knowing your expert advisor well. Expert advisors usually come with a set of programmable parameters which is configurable, depending on market conditions, to let the expert advisor be able to perform at its best (but still, it is either best for trending or best for ranging, no one set of parameters for both).

For me, I took a break from expert advisors.