Using price charts can provide valuable insights when you’re in the process of developing or refining your Expert Advisor (EA).
As well as the somewhat obvious initial stage of making sure your EA does what is intended, it is as, if not more important, not to become complacent checking back in at various stages of the EA development process and simply rely on “the numbers”. If you so this you run the risk of missing out on information that can not only make development more efficient and less ad-hoc, but also provide opportunities for better outcomes.
This is a guide to get you started and we will delve deeper into the types of analysis you can do in a future unit.
What to Look For
- Entry Points: Use charts to visually inspect where your EA would enter trades. Make sure entries align with your intended strategy and market conditions.
- Suggested Actions: On MT platforms the entry points (and exit points) should be marked on the chart that is automatically created. Add in any vertical or horizontal lines as well as period separators and indicators that form part of your EA criteria for action.
- Exit Points: Verify if the EA is exiting trades logically—be it a stop-loss, take-profit, or other strategy-based exits.
- Suggested Actions: Repeat as for entry Point actions
- Drawdown Periods: Identify periods where your EA seems to be losing money. This may be seen on the equity curve of any back/forward test of live trading.
- Suggested Actions: Observe what is happening to the instrument, relevant asset classes and the market as a whole during these periods and see if any patterns emerge.
- Indicator performance: If your EA uses technical indicators, ensure that its actions are in line with what the indicators are signalling. Watch for any that appear NOT to have relevance or potential impact negatively on outcomes. These can be tested and potential removed/refined in your EA.
- Suggested Actions: Overlay the indicators used in your EA directly onto the chart. Clear charts of any indicators you are not using for clarity, Thicken lines e.g., of key moving averages, Bollinger bands etc, again for clarity.
- Behaviour during different times: Check how your EA performs before, during, and after major economic announcements or political change, times of conflict etc for longer term EAs. Specific time of the day may be critical for those trading intraday e.g. day or session open and close.
- Suggested Action: Mark the time of these on the chart. See if there is any evidence of any change, and potential consider whether some “switches” that turn the EA on or off may be relevant to test.
- Trade Frequency: Ensure the EA is not overtrading or under trading (i.e. missing signals based on original intention of its core function) or closing as soon as it opens.
- Suggested Actions: observe any time of non-trading. Look for the relationships between entry and exit timing,
When to Check
- Initial Backtesting: After your first round of backtesting, check the charts to confirm the EA is behaving as intended.
- After Modifications: Every time you change a setting or tweak the EA’s code, revisit the charts to see the impact.
- Periodic Review: Even if the EA is live and trading, periodic chart reviews can help you catch any unexpected behaviour.
How to Check
- Multiple Timeframes: Examine the EA’s behaviour across different timeframes to check its adaptability.
- Zoom In/Out: Don’t just look at the big picture; zoom in to examine individual trades to ensure the EA is consistently following its rules.
- Record your findings: Using a snip function and pasting into a document where you can use annotations to mark noteworthy events, behaviours, or areas that need further investigation is always useful.
By routinely checking your EA’s performance on price charts and knowing what to look for, you can achieve a more nuanced understanding of its behaviour. This, in turn, can guide you in making calculated adjustments and refinements, improving the EA’s reliability and profitability.
As previously stated at the beginning, this is just your start point. As you become more familiar and proficient, then we can start to look more closely at different ways to identify potential areas to explore further within your EA.
This is a guide to get you started and we will delve deeper into the types of analysis you can do in a future unit.
What to Look For
- Entry Points: Use charts to visually inspect where your EA would enter trades. Make sure entries align with your intended strategy and market conditions.
- Suggested Actions: On MT platforms the entry points (and exit points) should be marked on the chart that is automatically created. Add in any vertical or horizontal lines as well as period separators and indicators that form part of your EA criteria for action.
- Exit Points: Verify if the EA is exiting trades logically—be it a stop-loss, take-profit, or other strategy-based exits.
- Suggested Actions: Repeat as for entry Point actions
- Drawdown Periods: Identify periods where your EA seems to be losing money. This may be seen on the equity curve of any back/forward test of live trading.
- Suggested Actions: Observe what is happening to the instrument, relevant asset classes and the market as a whole during these periods and see if any patterns emerge.
- Indicator performance: If your EA uses technical indicators, ensure that its actions are in line with what the indicators are signalling. Watch for any that appear NOT to have relevance or potential impact negatively on outcomes. These can be tested and potential removed/refined in your EA.
- Suggested Actions: Overlay the indicators used in your EA directly onto the chart. Clear charts of any indicators you are not using for clarity, Thicken lines e.g., of key moving averages, Bollinger bands etc, again for clarity.
- Behaviour during different times: Check how your EA performs before, during, and after major economic announcements or political change, times of conflict etc for longer term EAs. Specific time of the day may be critical for those trading intraday e.g. day or session open and close.
- Suggested Action: Mark the time of these on the chart. See if there is any evidence of any change, and potential consider whether some “switches” that turn the EA on or off may be relevant to test.
- Trade Frequency: Ensure the EA is not overtrading or under trading (i.e. missing signals based on original intention of its core function) or closing as soon as it opens.
- Suggested Actions: observe any time of non-trading. Look for the relationships between entry and exit timing,
When to Check
- Initial Backtesting: After your first round of backtesting, check the charts to confirm the EA is behaving as intended.
- After Modifications: Every time you change a setting or tweak the EA’s code, revisit the charts to see the impact.
- Periodic Review: Even if the EA is live and trading, periodic chart reviews can help you catch any unexpected behaviour.
How to Check
- Multiple Timeframes: Examine the EA’s behaviour across different timeframes to check its adaptability.
- Zoom In/Out: Don’t just look at the big picture; zoom in to examine individual trades to ensure the EA is consistently following its rules.
- Record your findings: Using a snip function and pasting into a document where you can use annotations to mark noteworthy events, behaviours, or areas that need further investigation is always useful.
By routinely checking your EA’s performance on price charts and knowing what to look for, you can achieve a more nuanced understanding of its behaviour. This, in turn, can guide you in making calculated adjustments and refinements, improving the EA’s reliability and profitability.
As previously stated at the beginning, this is just your start point. As you become more familiar and proficient, then we can start to look more closely at different ways to identify potential areas to explore further within your EA.