MetaTrader Strategies – Automated Trading
MetaTrader is the most commonly used electronic trading platform amongst online forex traders. Originally released back in 2005, MetaTrader is licensed to forex brokers who, in turn, provide it to their clients.
The platform comprises both a server and client component. The broker runs the broker component, whilst the client side element enables retail forex traders to manage their accounts, view live currency prices and movements, and place orders.
Why use an Automated Trading Platform?
Automated platforms like MetaTrader have a number of distinct advantages over trying to trade forex manually.
The principal one of these is that such platforms are impervious to the psychological and emotional influences that can affect and, in some cases, impair, the judgement of a human trader.
Human beings, by their very nature, are subject to impulses and preconceptions which mean that even experienced market traders, who are otherwise intelligent and rational, can be swayed by emotions and prejudices when executing a trade. This can lead them to try and chase losses by doubling up on a position, for example, or to try and eke out extra profit from a trade, when the sensible strategy would be to close it out earlier. Using predefined parameters, or those that have been programmed into it, automated emotions eliminate emotion completely from the process.
Another major advantage is that price discrepancies are immediately apparent, enabling information to be read by the trading system and trades executed subsequently. The forex market is vast, with more than US $5 trillion traded daily. Attempting to keep track of price movements manually would be a herculean task, and leave no time to decide appropriate strategies and execute trades.
And automated trading platforms can also place and execute orders much faster than a human can – a key advantage where even a few seconds can make the difference between a successful and unsuccessful trade. This means that, once an order has been placed, the system can also put in place, at the same time, measures intended to maximise profits and minimise losses, such as protective stop losses, and profit targets.
Using an automated platform allows traders to backtest a trading strategy. This is the process where the viability of an idea can be tested by applying trading rules to historic market data. The computer software will take the precise rules and parameters with which it has been programmed, and is then able to test them against the historic data that it has captured. That facility allows traders to evaluate and refine a trading strategy and determine the likelihood of its success, without having to risk any of their hard-earned money in live trading.
Last, and not least as far as individual retail forex traders are concerned, automated software programs enable them to have some sort of life away from the market. . Because forex is a global market which operates 24 hours a day, it can be all-consuming for an individual, especially if they have to balance family life, the demands of the day job – many participants take part in the markets in their spare time – and having to satisfy basic human requirements, like the need to eat and sleep. Automated software enables them to execute trades automatically and respond to market movements whatever the time of day or night, and without the intervention of the individual trader themselves.
Although there are a number of other automated trading platforms available, MetaTrader 4 (MT4) is the most popular by far, even more than its successor, MetaTrader 5 (MT5) which has struggled to gain the same level of market acceptance.
There are a number of reasons for this, the first and foremost of which is that it is free to use for traders, opposed to many competing programs which charge a fee. This means that traders can use the money which they would otherwise have to reserve for the software licence fee to trade instead.
Secondly, MetaTrader enjoyed “first-to-market” advantages, being the first platform to incorporate multiple charts, the navigator and market watch windows, a market terminal, and more than 80 pre-installed indicators. Whilst these features are now standard across the industry, traders grew used to them in MetaTrader, and many have seen no need to switch platforms since.
At the same time, the developers behind MetaTrader, MetaQuotes Software, have not stood still, and have introduced new features like a signals section, one-click trading, and a news section.
MetaTrader also remains one of the easiest platforms to use on the market – it is simple to navigate and intuitive, with symbols and rates displayed on the left, charts on the right, and indicators and other features at the top of the trading screen. And it can be fully customised, so traders can change the way that windows are displayed, the appearance of charts, and the order of internal and external indicators to suit their individual needs.
It also is a very convenient trading platform. The server is stable and can support thousands of trades at the same time, whilst it consumes very little computer resources and works well, even when there is limited internet bandwidth. It is also highly secure, with 129-bit key security acting as a safeguard against DDos (Distributed Denial of Service) attacks and malware and computer viruses.
One of the major features of the MetaTrader platform is algorithmic –or automated trading – which is designed to remove obstacles to analysis and trading activity by allowing traders to develop, test and apply Expert Advisors.
In forex trading, an Expert Advisor is a computer program that performs the instructions of an online trader without any direct involvement from them – all tasks are performed automatically or mechanically. By installing a forex Expert Advisor on the trading platform and defining a trading strategy, the program will begin executing trades on its own.
Expert Advisors relieve the trader of the need to have in-depth knowledge of technical and fundamental market analyses, as all calculations are already pre-built into the program. And even when the trader is absent, it enables the platform to handle and react to trading signals.
The developers of the MetaTrader forex platform, MetaQuotes Software, have developed their own programming language – MQL4 for MetaTrader 4 and MQL5 for its successor, MetaTrader 5 –to create Expert Advisors, and enable the program to trade day and night. And whilst the ability to write their own programs may be beyond the capabilities of an ordinary user, experienced software programmers should have no difficulty in picking it up and adapting as they see fit. And even novices can write their own scripts using the programming wizards which have been developed.
There is also the opportunity to freelance out the creation of a trading robot to a professional development through the “Jobs” service on the platform by formulating a clear trading strategy, specifying a budget and deadline, and effectively putting the task out to tender. Alternatively, there are online marketplaces for MT4 and MT5, where traders can buy ready-made solutions, such as trading robots, indicators, libraries or scripts.
Automated Trading Features
A built-in MetaEditor has been specifically designed for the development of trading strategies in the programming language, which also contains a debugger. The editor is also responsible for compilation. Once it has been developed, the application is automatically moved to the trading platform where it can be automatically tested in the Strategy component, before it is ready to go live.
The Strategy Tester allows a developer of a trading robot to assess its profitability, stability, level of risk and other parameters in test environment, using historical data for the selected currency pair or stock. It also allows for the optimisation of Expert Advisors, so it can be programmed to maximise profit, minimise risk, or meet other pre-defined criteria.
One advantage that accrues with the popularity of the MetaTrader platform is the thousands of indictors and third-party robots which have been developed to work exclusively with it. And, apart from Expert Advisors and other indicators, traders have also written scripts which can perform specific functions, such as taking a screenshot of a specific area of a chart.
And whilst traders can develop their own Expert Advisors, both MT4 and MT5 have several built into the system as well. They function as independent trading systems, and have proved to be very popular, especially amongst beginners.
Whilst there are many automated forex software trading platforms on the market, none can match the popularity and widespread acceptance of MT4, and, to a lesser extent, MT5. This is not only because these platforms are free, with no licensing costs for individual traders but also because they are easy to use, and convenient, full of features such as charts, easy to read prices, and trading indicators. They are also simple to customise.
One of the biggest advantages that they have is the ability for traders to create their own Expert Advisors – intelligent trading robots that operate independent of traders themselves, able to execute orders automatically using pre-defined criteria.