The biggest secret in algorithmic trading that nobody seems to mention is that creating a robot is not a difficult task, especially with the latest trading platforms that allow you to do so without even knowing to code.
The difficulty has been, and will likely always be, finding the edge. Seek to ask and answer the question ‘What is it about this specific entry or exit point that will likely lead to profits, relative to any random entry/exit point?’, and only proceed to create a robot when you’re truly confident in your answer.
To learn about the trading edge, you can start with this Investopedia article.
However, starting your first trading robot can be a complex task. This article will help you get started by detailing the various hardware and software requirements necessary for building your robot.
To be able to perform demanding backtests, an algorithmic trader will need a powerful computer with a lot of processing power. This will allow them to test their strategies quickly and avoid wasting time waiting for the test to finish.
The performance of a trading computer is very important to an algorithmic trader. In order to perform well, you need a powerful multi-core CPU and plenty of RAM. Having an SSD is also important to ensure that you can store large amounts of data.
The minimal requirements are:
- CPU: A modern CPU with at least 4 cores
- RAM: At least 8 GB
- Storage: 240 GB SSD or more
While using an algorithmic trading program, traders rely on the software they’ve purchased to execute their trade orders. However, if the program doesn’t feature the necessary features, it could cause them to lose money.
As ICMarkets stated — MetaTrader 5 is an all-in-one, state-of-the-art & multi-asset trading platform, covering both centralized and non-centralized financial markets, including stocks, futures, and FX trading instruments. Worth considering.
3. Development Environment
Once you have all of your hardware and software, you will need to download the development environment. This is a tool that will allow you to code your Expert Advisor. You can download the free version of Visual Studio or use the integrated development environment (IDE) in MetaTrader 5.
Don’t hesitate to ask the community. For instance, MQL5.community has a large community of traders who are always happy to help new traders learn about the platform and find the best robots. The community is also a great place to find feedback about specific robots.
The MQL5.community Freelance is a platform that connects developers with customers who are looking for trading applications for their MetaTrader 5. It eliminates the need for developers to spend time on non-production tasks, while you — as a customer — can specify the custom need and save on development costs.
Once you have finished coding your Expert Advisor, it’s time to test it in the Strategy Tester. This can be done on the demo account or a real account. If you decide to test on a demo account, use the “testing” mode and create a user-defined ticket with non-tradable lots.
Testing on a live account is only possible if you are an expert programmer and have specialized knowledge in order to avoid any losses! It is also possible to install your trading robot as an expert advisor onto your MetaTrader 5 broker’s practice platform.
In addition, the Strategy Tester can access the MQL5 Cloud Network. Over the last decade, the number of test agents has increased to 34,000. Anyone can sell the capacities of their agents and thus earn money for their MQL5.community account.
To use your Expert Advisor in real trading, you should place the files (ex5 or mq5) in the right folder.
- Go to the ‘Open Data Folder’ command in the ‘File’ menu of the MetaTrader 5 Terminal.
- Open the ‘MQL5’ folder.
- Open the “Experts” folder.
- Place the file there with extension ‘ex5’ or ‘mq5’ or both of them.
- Restart the MetaTrader 5 Terminal (Close it and open it again).
If you’ve purchased the Advisor from MQL5.com Market, simply follow this guide to start using the algorithm.
In order to keep your trading system up-to-date, you will need to check the following:
- update the version of MQL5 on your development environment and any other platform (expert advisor, third party tool…) that you have embedded your Expert Advisor on.
- update the version of your Expert Advisor in MetaTrader 5.
- check that your trades are profitable and not getting any losses.
- fix bugs if any occur, or cancel bad trades if they were placed on the live account.
7. Running Indicators
Another way to make money with your trading robot is by running a new indicator that you have created. You can publish it on the forums at MQL5.com and sell it to other users, who wish to use it in their robots.
8. Using Robot Trading Software
If you don’t want to work with custom coding and indicators, some robot trading software systems are provided by MQL5.community resources.
- Expert Advisor Wizard. This is free software that comes with the MetaTrader 5 integrated development environment. You can use it to create your own trading robot by adding a number of indicators, strategies, and expert advisors.
- Expert Advisor Builder. This tool created by one of the community developers is very similar to the Expert Advisor Wizard. However, it is not integrated into MetaTrader 5. It can only be used as stand-alone software or installed on your local computer.
Once your trading robot is fully working, you can analyze the results. You will probably find that the trades that return a profit are the ones that are set to buy or sell quickly at a good price. The ones that lose money are usually those where the price is not moving fast enough and/or where it is moving against you.
In order to stop losing money, you can reduce the number of trades and try to set them up as long as possible by waiting for a good entry price. It is also possible to use stop-loss orders on your robot and risk reduction tools.
As the methods of assessing the trading robot performance results may be tricky, the University of Pennsylvania has in-depth research on using the implementation shortfall metric for proper robot evaluation. This metric is the difference in return between a theoretical portfolio and the implemented portfolio.
If you would like to buy an Expert Advisor rather than build your own, you can surf the Market on MQL5.com. This will enable you to do a technical and fundamental analysis of an Expert Advisor before buying and will also enable you to determine whether it is profitable by looking at its results on paper or on a demo account.