Basic Rsi Template Expert Advisor For MT4
WE IMPROVED THIS EXPERT ADVISOR FOR YOU!!!
PLEASE NOTE: This expert advisor was publicly available for free usage on other websites and is not programmed by us. We explain the functionality and possible improvements of the EA. Furthermore, we are convinced that fully automatic Expert Advisors will fail in the long run. On the other hand, our semi-automatic approach with detecting the best setups and then activating our Expert Advisors (e.g. V-Power EA, EdgeZone EA) produced many successful traders and some of them even got prop traders at prop trading firms. Therefore, we added a similar semi-automatic trading feature (to allow only buy or only sell trades) to the free Expert Advisors. You can download the modified version here and enjoy!
Table Of Contents:
- Basic Rsi Template Expert Advisor For MT4
- The Basic Rsi Template Expert Advisor For MT4 – Entry Criteria
- The Basic Rsi Template Expert Advisor For MT4 – Exit Criteria
- The Basic Rsi Template Expert Advisor For MT4 – Room for Improvement
As the name suggests, the Basic Rsi Template Expert Advisor For MT4 uses the basic or standard settings of the relative strength index (RSI) indicator that comes with the MetaTrader4 trading platform to enter the market. This trading system trades one symbol at a time unless the user runs multiple instances of the program in different symbols. It can work on a trading account connected to a five-digit or four-digit broker.
The Basic Rsi Template Expert Advisor For MT4 – Entry Criteria
The Basic Rsi Template Expert Advisor executes its algorithm when a new tick comes in, and it does not perform a series of preliminary checks prior to searching for trade opportunities. As a simple trading system, it gives the user a few parameters to work on and adjust at will in the expert settings. These parameters are listed below:
- MagicNumber = 1234567 – This number is assigned by the expert advisor to every trade it takes. This information is useful in trade management or monitoring the performance of the trading system.
- Slippage = 3 – This amount is in pips and defines the maximum slippage that the user is willing to accept for execution of a trade request. If price has fluctuated more than 3 pips from the requested price, the client terminal will not open the trade.
- MM = false – This parameter stands for money management and defines if the user wants to use a fixed or dynamic lot size on each trade. A false value means the user prefers a fixed lot size.
- StaticLot = 0.01 – This is the static lot size for all trades.
- Risk = 2 – If the user sets the MM value to true, the expert advisor will calculate the lot size as a percentage of the account balance (two percent in this case).
- TakeProfit = 20 – This is the default take profit of each trade in pips.
- StopLoss = 30 – This is the default stop loss of each trade in pips.
- OB = 70 – This term stands for overbought. This value is equal to the oscillator level at which price is considered overbought.
- OS = 30 – This term means oversold and is equal to the oscillator level at which price is said to be oversold.
The expert advisor uses the relative strength index as the only indicator for trade entry. In this system, the robot uses the default settings for RSI when looking for a trade signal. As an oscillator, the RSI has the ability to measure the relative value of price. If the RSI value is greater than 70, the underlying market is said to be overbought or overvalued and so a downside reversal or correction can be expected. On the contrary, if the RSI value is less than 30, the underlying instrument is considered oversold or undervalued; thus, an upside reversal or correction is indicated. While this RSI signal is not accurate in terms of entry timing, it often marks the beginning of an imminent reversal or pullback.
A trade is initiated in this manner. The robot checks first if there is no open trade yet on the current symbol. Then it looks for a signal from the RSI indicator. To arrive at a trade lot size, the robot compares the lot size in Inputs set by the user with the minimum and maximum trade volume permitted by the client terminal for the current trading account.
To approve a trade request, the lot size must be on or within the minimum and maximum trade volumes. If the user will not adjust the default lot size, the trade volume will always be 0.01 lot. If the user does set another value, this value will be used by the expert advisor if it is within the minimum and maximum limits.
Prior to trade entry, the expert advisor checks if the trading account has enough free margin to carry new trades. If so, a trade is taken. After the trade was successfully executed, the stop loss and take profit values are added immediately thereafter. This is evident in the trade results in the strategy tester.
The Basic Rsi Template Expert Advisor For MT4 – Exit Criteria
Once a trade has been executed, the Basic Rsi Template Expert Advisor does not take an active part in trade management. Whether the trade wins or losses is left for the market to decide. It wins if price hits the take profit target or loses if price touches the stop loss. Since the stop loss distance is bigger than the take profit distance, the trading system must produce more wins than loses to generate profits for the trader.
The robot takes one trade at a time and waits for the current trade to be closed before looking for a new trade opportunity. If the technical indicator provides a signal in the direction opposite to the current trade, it does not close the current trade to open a new trade in the other direction.
The Basic Rsi Template Expert Advisor For MT4 – Room for Improvement
The Basic Rsi Template Expert Advisor was run in the strategy tester to get an idea of its trading performance. Using seven months of historical price data on the EURUSD symbol 15-minute chart, the robot took 328 trades, averaging around 50 trades per month. This number of trades is enough to opine on the profitability of this trading system.
The testing ended with minimal loss for the trading account, drawdown was low (less than one percent), and the robot managed to generate a 58 percent win rate. It is interesting why the robot failed to produce profits when the win percentage was greater than 50 percent. The obvious reason is the unfavorable risk-reward ratio.
The above ratio essentially means that if a trade wins, for example, a profit of 20 dollars can be realized; however, if a trade loses, the account stands to lose 30 dollars. All this means that the trading system is not primed for success in the beginning. While this is the case, a code change is not necessary to correct this issue. The user himself can address this matter by manually adjusting either or both the stop loss and take profit values in Inputs.
A higher win rate for all trading systems, both automated and manual, is always desirable. The high win rate generally covers up any inaccuracies in trade settings and any anomalies in trade execution, but it does not always lead to profitability. A good balance between risk-reward ratio and win rate is the most crucial factor in being profitable.
One simple way to improve the win rate of this trading system is to add a trend filter. The short-term trend can be considered first. It is a good idea to trade with the short-term trend on the active period and take only the RSI signal that is consistent with this trend. When a market is trending up, for example, the robot should take long positions only and ignore sell positions. This will significantly reduce the losses along the way. However, effecting this type of change involves reworking of the program code.
To improve the algorithm further, the long-term trend on a higher timeframe could be considered as well. In this scenario, the expert advisor would only trade when the short-term trend is aligned with the long-term trend and if the RSI is overbought or oversold in the trade entry timeframe. A technical indicator that can determine both trends effectively is the moving average. Depending on the user or coder, one or two moving averages can be used for this purpose.
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