Trailing Stop Limit

The trailing stop limit allows the user to have a system, which when profitable locks in gains by sliding the stop loss higher. In effect, if a trade is in profit, the system will calculate the degree of difference between the current price and the trailing stop limit level. This stop ‘distance’ will be kept at all times and will only change if the position continues to be profitable. If the trade turns negative, then the trailing stop limit will lock in at the current level. An effective way of not limiting profit potential, the trailing stop limit can also be used as a take profit setting.  The Trailing Stop Limit is a custom indicator and must be downloaded separately. Please contact your account manager for further details.

Basic Stop Loss

The default setting on the Forex Strategy Builder is the basic stop loss. This parameter allows the user to specify a level that he/she wishes to trade out of in the event the position turns into a loss. The basic stop loss can be set by choosing the strategy properties tab in the middle of the FSB interface. When generating a strategy, please ensure that the box is ticked if using the Stop Loss.

Day / Night Stop Loss

The day / night stop loss is relatively straight forward in its interpretation. In effect the online forex trader can set a stop out level or time on a trade. The time could be set to go off each day at a specific session time or period. This can also help traders to stopping overnight position and weekend holds. To set the day night stop loss please choose the indicator from the closing position logic button on the strategy.

Reversal Stop

The final stop loss type that can be effectively used on the Forex Strategy Builder terminal is the Reversal Stop. When a trader sets his or her stop loss levels, they can also choose to close a position if a reversal signal is found. For example, if a position is opened because the moving average indicators meet the set conditions or trading guidelines, then the position can also be closed if the system generates an opposite position. This has become quite popular with traders. Care however must be taken, when using this setting. It can be found in the strategy properties window.

For more information on the above parameters please visit Vantage FX.

Step  1:  Data Folders

The user needs to define the data upload directory. This can be done by clicking on Market and Data Directory. Please either specify a directory or use the default. When we open the Metatrader 4 platform and download the data, we will need to save it in this directory.

Step 2:  Open the Metatrader 4 Terminal

Open the Metatrader 4 terminal and navigate to Tools – History Center. This is the interface, where data can be downloaded for each individual forex pair.

Step 3:  Download the Data from Metatrader 4

In the History Center, choose the pair from the left hand menu. Once you have defined which pairs data you require, the window interface will either load with or without the data. To gain access to the most up to date data, please click on Download on the bottom left hand corner of the window.

Step 4:  Export the Data to Forex Strategy Builder

Once the data has finished downloading, please click on the export button. You will then be required to choose the correct folder on the FSB. This is the folder you defined at the beginning of the steps.  Once this is saved in the folder, then the data will automatically upload in the correct format.

Step 5: Refresh the Forex Strategy Builder

Once the data has been uploaded, you will need to refresh the currency pair. This can be done by either choosing another pair or clicking on market, then reload. The new data will show on the system. If an error window opens, identifying that the data is not complete or has gaps, please go to step 6 of the process.

Step 6:  Cut off Bad Data or Fill in Gaps

Sometimes data during the transition process can become corrupt or ineffective. The Forex Strategy Builder allows the user to cut off bad data through the market window. This will then quarantine the suspect data periods. Traders can also fill in gaps in data via the market window. This step is very important as this can determine the accuracy or validity of the system.

For more information on Downloading Data and the Forex Strategy Builder please visit Vantage FX.

Profit Calculator:

The profit calculator allows the user to define specific entry and exit points and the number of lots/ size traded. Effective in analysing the impact of movements in price on profit and loss, the Profit Calculator can be used to define stop loss and take profit levels.

Fibonacci Level Calculator:

Many traders use Fibonacci levels to specifically analyse waves or patterns in price movements from the high or low in a trend.  These key price points can define breakouts and breakdowns of movements. Fairly important calculator when used concurrently with technical indicators.

Pivot Point Calculator:

Pivot points focus on support and resistance levels within market movements. Relatively popular indicator, the PP allows the trader to focus on the strength or weakness of a price within a trend.

The Optimiser:

When generating a strategy through the Forex Strategy Builder, the Optimiser can supply the user with the ability to adjust the system for performance. Care must be taken though when using the optimiser, as it can result in curve fitting.  The optimiser will open the predefined strategy and highlight the current settings (eg Moving Average levels etc). The trader can then change these levels, and accordingly the performance chart will adjust. It is key to double check the optimiser with an overlay before using the strategy. Extreme care must be taken.

The Comparator:

Unique tool offered by the Forex Strategy Builder. The Comparator allows the user to look at how the system works under different scenarios. For example a pessimistic market, or an optimistic market. This will flag the true performance during these periods and is an effective way of defining the validity of the system or strategy.

Bar Explorer:

The Bar Explorer will analyse each bar based on whether or not a position has been opened in back test. In effect, this tool allows the online forex trader to look back at how and when a position was opened and how it played out during the market conditions. The Bar Explorer can be important if the user is looking to replay a certain period or periods.

For more information on the tools that are offered in the Vantage FX Strategy Builder please visit Vantage FX.

Please note that this is a special offer only available to Vantage FX clients. Clients will gain access to the CrossOver bridge for free, if they setup a Live Account with $1000 and trade a minimum of 20 lots. For the detailed steps and information on the software please refer to instructions below. For more information or support please contact one of the Vantage FX representatives by direct line, email support@vantagefx.com, Skype or Live Chat.

Instructions

1. Install CrossOver Trial

Codeweavers offer a bridge called CrossOver which will be the base for the installation process. The application must be saved in the applications folder on your computer. To specifically gain access to the CrossOver Trial bridge for the Vantage FX Metatrader platform, please click on the free trial link below:  http://www.codeweavers.com/via/MetaTrader4

2. Download Metatrader                  

The next step in the process involves the download of the metatrader platform from the above link. Once this is completed a confirmation message is provided.

3. Setup and Launch MT4

The Final step in the process is to setup and launch the MT4 platform by clicking on the terminal link. Using the same link as PC users, the installer will navigate you to the correct folder path. The CrossOver plugin will show up as soon as the person clicks on the exe file. It is key that the user unclicks the automatic launch capability on the platform when using the terminal on Mac. This option can cause problems when loading the system.

4. Contact Vantage FX

Once you have downloaded the trial, and setup an account please contact your Account Manager at Vantage FX. They will then activate a licence for the software. If you do not meet the specific terms and conditions set out on the website, the user will be charged the CrossOver software cost.

For more information on online forex trading, please visit Vantage FX.

1. Inadequate grasp of fundamental analysis Most new forex traders really understand what drives currency rates (primarily economic fundamentals). Rather than trading right after the news report when the market is most volatile they are taught to only trade after the dust has settles. So essentially they miss the key time in which to earn profits.

2.  Trading too often – Trading often with tight stops and tiny profit targets will only make the broker rich. This “play it safe” strategy is not so safe and it primarily makes the broker’s profits and not the traders.

3. Using too much leverage – Leverage is a two way street. The brokers encourage traders to use high leverage because that means more spread income because the position size determines the amount of spread income; the bigger the position the more spread income the broker earns.  Once again, what is good for the broker is not necessarily good for the trader.

4. Relying on Others – Real traders make their own decisions based on their own analysis and instinct and don’t rely on others to make their trading decisions for them.  Either learn to make trade decisions by yourself as quickly as possible or rely entirely on others.  Half and half does not seem to work.

5. Stop Losses – Putting tight stop losses with retail brokers is great way to lose money.  Once again it is one of the situations like trading often which seems safe but, in fact, is not. When you put on a trade, use a reasonable stop loss limit that allows your trade a fair chance to develop.

6. Demo Accounts – Broker demo accounts are a shill game of sorts; they give traders the illusion that their trading skills are higher than they actually are.  Demo accounts are not as time-sensitive as real accounts and therefore give the impression that time-sensitive trading systems, such as short-term moving average crossovers, can be consistently traded profitably.  Once you start dealing with real money the grim reality is quick to set in.

7. Don’t trade during off hours – Bank FX traders, option traders, and hedge funds have a huge advantage during off hours.  When the volume is down big players can alter the market  when no volume is going through and the end game is that new traders have even less of a chance of success. There is only one signal during off hours – stay out.

8. Not focusing on the Pair– Novice traders often only analyze one currency rather than analyzing the currency pair.  Expertise on only one side is, more often than not, ineffective and dangerous. You must do technical and fundamental analysis on both currencies. It is pair dancing not just one.

9. No Trading Plan – A trading plan is a strategy for trading success; it spells out the competitive edge of the trader. If you don’t have an edge, and your edge has not been tested carefully, you will likely end up as a statistic (part of the 95% of new traders that lose and quit).

10. Trading Against A Prevailing Trend – There is a huge difference between buying cheaply on the way down and buying cheaply. What a trader thought was the low price can quickly end up being the high price if the downward trend continues.  Make sure you got the direction right.

11. Poor exit strategies – If you put on a trade and it’s not working, don’t make thing worse by using an unintelligent exit strategy.  Don’t just mindlessly duck and run. If you’re in a winning trade just leave because you are stressed out or bored.  Only exit a winning trade if you are sure you have an even more profitable substitute.

12. Trading Too Short-term – If you’re anticipated gain is less than 10 points don’t do the trade; the spread you pay to enter the trade will probably be greater than your profits..  This is the corollary of “Trading too often.”  Hyper activity does not necessarily mean profitability.

13. Picking Tops and Bottoms – You can lose money by waiting for the absolute top or the absolute bottom of a cycle.  Few pros can do this much less novice traders.  Be content to adequately identify the direction of the trend and trade accordingly.  Your results will improve.

14. Being Too Smart – The most successful traders don’t overthink the process. By keeping it simple but concrete, many top traders generate solid results again and again.  You do not need a Ph.D. and in fact it might get in the way.

15. Not Trading Around News Time – Most of the big moves occur around news time.
News time is the best time to trade fundamentally or technically.  The serious players all adjust their positions after the news so this is when serious currency is moved.  This is when you can make your profits.  So, while in theory forex is a 24 hour market, the really profitable activity occurs around news time.

16. Ignoring Technical Conditions – Using technical analysis can help determine when a major correction is likely to occur. Spike moves often occur when the market is overextended long or overextended short.

17. Emotional Trading – Many people do their trading based on emotion or instinct. This is not trading – it’s gambling. Do not confuse real analysis with pursuing “luck.”

18. Lack of Confidence – Many people lose their confidence after a few bad trades and quit.  The key to preventing this is to prepare adequately before you trade by using demo accounts and studying technical and fundamental analysis.  Also, understand that losing is part of winning, and don’t get discouraged.  Study your losses and learn from them. Don’t just run. You will gain confidence with study, practice, and, eventually you’ll be succesful

19. Lack of Courage To Take A Loss – Understand when you are losing and get out.  Do not get stoic or brave in a situation in which you are highly unlikely to win.  Your job is to earn profits and control losses, not be John Wayne.

20. Not Focusing On The Trade At Hand – Do one trade at a time giving each trade your maximum attention.  Don’t get lost in a fantasy about how and when you are going to make your fortune. There is no room for fantasizing in successful trading. The corollary is not worrying about losses that have not happened yet.  You must do your best to prepare, focus on your position, put a reasonable stop loss in place and then enjoy the ride.  The market will do what the market will do.

21. Interpreting FOREX News Incorrectly – The press offers normally very superficial, impressionistic news.  It often lacks any profound analysis.  Learn to read the source documents and develop genuine understanding. Leave the herd.

22. Winning Is Not Always Everything – Just because you are making profits does not mean you are trading well.  Every poker player gets their occasional winning streak. You may be winning in spite of bad technique.  You need to evaluate your strategy and see if it makes sense even if you are winning.  In the long run, bad strategy will not generate profits. Keep the big daily losses down and you may be on the right track.

23. Consistency – When you make money on a good, well-thought-out trade, don’t lose it on an impulse trade because you now feel lucky.  Stay focused and calm

24. Courage Under Fire – Trading, like any fiercely competitive endeavor, requires courage.  Like for a fireman, a policeman, or a surgeon, courage is part of the job. It is okay to be nervous and stressed out but you still must pull the trigger, no decision = no trades = no profits = no trader.

25. Only Play With Your A-game – Trading is super intense.  Many experts suggest you only do three hours a day of really quality, focused trading.  That is about the maximum stress you can effectively cope with in a day.  When you go beyond that you get sloppy and your decisions become far more emotional.  Less than optimum trading often just loses you money.  Better not do anything.  Trading rewards effective performance, not empty busy work. Spend less time but when your trading bring nothing less than you’re a-game.

26. When You’re wrong, You’re wrong! – If when you put your trade on it hits your strategic  pre-determined stop, you’re out.  Your analysis was wrong but you were smart enough to put some risk management machinery in place.  Accept your mistake and move on.  Absolutely do not move your stops. That is like being a poker player on tilt.  If you were wrong in the first place, then being overly aggressive and emotional is highly unlikely to remedy it.  A small loss won’t kill but going on tilt might.

27. Switching Midstream – Don’t switch currencies just because there looks to be more action in the neighborhood.  You don’t know enough to make a rational decision and you will likely get burned.  If you are trading EUR/USD, stick to that; don’t switch to EUR/GBP unless you are really willing to invest the time in knowing what is really going on.

28. Shying Away From The Hard Trades –FX traders often say “ the harder the trade is to do the better the trade.” This I learned from experience: when I needed to buy EUR/USD and it was hard to get them that’s when it was important to take action. If its easy, that’s a bad sign. So if you’re trying to get into a trade or, more importantly, get out of a trade, don’t dawdle around for a few points. Get it done!

29. Too Much Detail – If you’re trading more than two indicators then you have too many. All you need is a setup and a trigger.  If you are doing much more than that you could be slowing down trades

30. Giving Up Too Easily – Don’t quite because your first trade does not go well.  It is not an omen or a harbinger of evil.  Have a preset limit of trades each day and do it as calmly and intelligently as you can.  You can not make money or learn if you quit every time there is a mistake.  Trading is a job just like any other endeavor, there are no shortcuts to earning money other than inheriting it from your wealthy parents.

For more information, please visit Vantage FX.

1. Save the Strategy in Forex Strategy Builder:  Once the xml file is generated, the strategy is then converted into language that is compliant with the Metaquotes system
2. Open the Forex Strategy Trader and Choose the Strategy:   Click on the File and Open tabs on the top left hand corner of the screen. Once the file is opened, it will then pre fill the page with the necessary strategy parameters (ie take profit, stop loss levels etc).
3. Specification of Connection ID:  The connection ID allows you to define whether you use single or multiply strategies. Please allocate a number to your strategy (ie 1), and remember this connection ID as you will need to input this number again on the MT4 platform. If you wish to run multiple strategies on different charts on the Mt4 platform, you will need to open multiple Forex Strategy Trader windows, and chose a different connection ID for each strategy.
4. Open the MT4 platform and choose the Chart:  Once you have opened the chart please drag the MT4-FST Expert Advisor on the chart.
5. Configure the MT4-FST Expert:    Please ensure that you tick the Allow Live Trading, Allow DLL Imports, and Allow Import of External Imports boxes on the Common Window. In the Inputs section, please define the correct connection ID you used when opening the strategy in the Forex Strategy Trader. Click on Ok.
6. Execution of the System:  Once you have completed the installation of the expert on the chart, please navigate back to the open Forex Strategy Trader window. It will now show a highlighted “Start Automatic Execution” button. Once you click on this, the system will then bridge the model with the MT4 platform

There are a number of key considerations when using the bridge functionality on the Forex Strategy Trader. Firstly, it is important that the Forex Strategy Builder and the MT4 platforms are kept open at all times, otherwise the system will not execute trades. The second important point to keep in mind is that the Forex Strategy Trader can sometimes not initiate all of the take profit and stop loss parameters. A break in connection due to the internet or a lag in downtime between the MT4 platform and the FST can result in a trade being executed, but stop loss or take profit levels not set. It is recommended that you keep a close eye on the system when it trades, and not to leave it to its own devices. Caution must be taken at all times when using an automated system, as it can result in significant losses.

For more information, please visit Vantage FX.

Some of the key features of the Intrabar Scanner include:

• Definition of Data Horizon:    Ability to specifically choose time periods within a data set. This allows the user to analyse ambiguous time frames efficiently.
• Percentage Ambiguous Bars:    The degree of bars within a specified time frame which are ambiguous
• Colour Illustration of Data:   The data is labelled by specific colours. This allows the user to see specific data sets and what range they influence (from and to periods)

The Intrabar Scanner in a nut shell allows the trader to break down an ambiguous bar into separate time frames or periods; hence identification or accuracy is attained.  Highlighted below is an example of where the scanner can be used effectively.

(Source: FSB,2011)

Example – AUDUSD 1 Day Data

• Trader A is looking to develop a strategy based on Moving Averages on the AUDUSD 1 Day time frame. He downloads data from Metatrader and saves it to the relevant strategy builder data directory
• Trader A then opens the data and notices that there are some periods, where there are gaps or spaces. These are classed as ambiguous. In order to accurately assess how the strategy will perform during these gaps or holes in data, the trader needs to utilise the intrabar scanner.
• Trader A opens the scanner and downloads the data period, and checks the data over a different time frame (ie 5 or 15 minute period). During this time frame, the trader will then specifically identify how the system will perform during the gap in the 1 day data.

The Intrabar Scanner is an extremely accurate identification tool that should be used on a regular basis when developing a system or strategy through the builder.

For more information on forex metatrading, please visit Vantage FX.

In an effort to simplify the process, the Forex Strategy Builder was built with the intention to efficiently generate trading systems and strategies with limited programming requirement. A very unique parameter which exists on the platform is the generator section, which allows the user to specify indicators, risk management, and define the degree of profitability. Unlike many softwares or trading terminals, the generator is comprehensive and extremely efficient. A system can be generated within 2 minutes.  When using the generator it is important to understand the basic parameters and settings, which can shape a system or strategy.

Some of the key settings include:

• Common Section:   Allows the user to define whether or not he /she wishes to use the default stop loss or take profit. This part of the platform also identifies the number of corresponding orders or open logics.

• Limitations Section: The trader is able to specify maximum allowable drawdown dollar amounts, minimum or maximum number of trades, and the performance percentage. The OOS filter is important when defining whether or not a strategy is curve fitted. The filter allows the trader to block out certain sections of data, which can be key in defining the profitability of a system.

• Settings: Fairly generic section on the generator page, the settings tab identifies the out of sample testing amount.

• Top 10: Relatively new feature that was added to the  Strategy Builder. The Top 10 function compares trading systems, based on slight variations in parameters. Caution must be taken when looking at the results, as curve fitting can occur.

• Indicators: This section provides the user with a filter to determine which data and parameters to show.

The generator is quite simple to use, supplying  the novice developer or trader with an adequate tool to define a trading system. Firstly the user must choose which indicators, he/she wishes to use. A multitude of different indicators can be found in the indicator folder. The second step in the generation phase, is to specifically determine whether or not risk management or take profit levels will be used. Once the trader has defined each parameter, he/she can then click submit and generate a strategy. The software will determine the most effective trading patterns during a specific time frame.

Caution must be exercised at all times when using the Strategy Builder. All back test softwares and systems have an inherent common flaw – performance is in hindsight. A  system that works during a volatile market may  not work during a flat period of consolidation.

For more information on online forex trading, please visit Vantage FX.

The difficulty of curve fitting strategies is the definition process and the ability to weed out the profitable from the non profitable. Some important ways to identify whether a strategy is curve fitted includes:

• The testing of the strategy by utilising random periods or data. If the performance is completely different or does not correspond to overlayed periods, then the strategy could be curve fitted.
• Over optimisation can result in discrepancies in performance and validity. Traders that tweak indicators, and strategies, to the point where a profitable result is attained. An effective way of identifying whether this occurs is through the detailed analysis of the base indicators. Once again the performance data will provide an objective overlay and highlight the degree of over optimisation

To truly understand the concept of curve fitting, we have highlighted below two different examples, based on the moving average indicator.

Example 1:

Trader A is developing a system based on the basic moving average parameter. He chooses an entry logic when the short term (15) day moving average crosses over and below the long term (50) moving average.  The Trader wishes to add a stochastic overlay as an exit point, with parameters which include (15,2,50). These define the level of range and how sensitive the indicator is over the specified time frame.

Trader A leaves the basic parameters and sees that the strategy is not profitable. He then generates a scan over the last 4 months, to determine the specific parameters that have been profitable. The Stochastics measurements highlight that (10,2,70)are the most profitable over this period, and the chart indicates a significant profit. This can be identified as curve fitted, as the parameters are determined by specific periods. In essence over the long run, these settings will not work and could provide for significant losses.

Example 2:

Trader B also wishes to develop a strategy based on the basic moving average indicator. Instead of using the stochastics overlay, she decides to  focus on the Bollinger bands as entry and exit points. Once the indicator is overlayed with default settings, the profitability of the strategy is quite high. To determine the effectiveness of long term performance, Trader B modifies basic settings. Specifically choosing random data points, the Trader is then able to hypothesis. In this example the performance is consistent and deemed to be not curve fitted.

For more information, please visit Vantage FX.

View

• Language:  Define the language that the platform uses. Currently the program has 6 different default translations in English, Spanish, German, Hungarian, Bulgarian and Russian.
• Language Tools: Languages can be added and translations customised via the Language tools tab. If you wish to specify a new or correct a translation, please visit this section of the site.
• Indicator Chart / Account Chart: The indicator chart loads a current chart of the specified financial product (ie EURUSD 1 hour). The Account Chart compliments the IC as it provides a detailed  profit / loss and equity balance histogram. This can be quite useful from a trade analysis point of view.
• Journal by Positions / Journal by Bars: If you wish to analyse a trading system and its individual trades over the desired time range, the Journal by Positions will be quite useful. On the other hand, if you are interested in defining  bar by bar movements, please use the Journal by Bars.
• Colour Schemer:  Forex Strategy Builder is a unique software that allows for complete aesthetic customisation. Traders are able to define a range of different colour palettes.

Account / Market

• Account Settings: This section of the site allows the user to specific, the account size, leverage value, and currency.
• Charges: Spreads, Swaps, Commissions and Slippage can be inputted in this section. It is important to add a level of slippage when defining a trade strategy. This will provide a clearer or more realistic performance scenario.
• Data Horizon: The Data Horizon can confuse users, as it specifically identifies the number of bars, and data time frame filtering. If you wish to test a system during a predetermined time frame, please activate the data older and newer parameters. Please keep in mind that some strategies will be more efficient during different time frames. This can sometimes cause curve fitting and care should be taken.
• Edit Instruments: To add a new product to the directory, please use the edit instruments section. It is important to modify the lot sizes, commissions, swaps etc for each tradeable product; otherwise the back tests may be skewed or inconclusive.
• Check / Cut-off Data:  Validity of data is key when designing a robust trading system. In some cases, gaps or corrupted data can cause incorrect trade recommendations or returns. When selected, the Forex Strategy Builder will run a scan of the specific data in question. It will then summarise the strength of the pricing history. This can be quite important from an accuracy point of view.

Identifying the key parameters for a trading system, can shape both the validity and performance overall. The discussed settings are important and must be inputted prior to the development of a system.

For more information on online forex trading, please visit Vantage FX.