Chaos Trader Lite 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:
- Chaos Trader Lite Expert Advisor For MT4
- The Chaos Trader Lite Expert Advisor for MT4 – Parameters
- The Chaos Trader Lite Expert Advisor for MT4 – Entry Criteria
- The Chaos Trader Lite Expert Advisor for MT4 – Exit Criteria
- The Chaos Trader Lite Expert Advisor for MT4 – Room for Improvement
The Chaos Trader Lite Expert Advisor For MT4 is designed based on chaos theory as presented in the book Trading Chaos by Bill Williams. In this trading system, three setups are considered for trade entry. These setups are the first wise man, second wise man and third wise man. While the original strategy uses indicators such as fractals, alligator and awesome oscillator as developed by Williams, the current trading system employs mostly moving averages to arrive at similar results.
Although the trading system sounds fascinating as it is based on a popular classic strategy in technical analysis, it fails to return profits when tested over five months of historical data using EURUSD 15-minute chart. This is primarily due to the low win rate of about 28 percent. Due to the limited testing time, however, this test result is not conclusive when it comes to determining the effectiveness of this trading system.
The Chaos Trader Lite Expert Advisor for MT4 – Parameters
The Chaos Trader Lite Expert Advisor opens a pending order if any of the three setups manifests on the current symbol. The image above shows what the first wise man buy setup looks like. The expert advisor can open up to three pending orders of the same type if all three setups occur on the chart.
The trading system gives the user a few parameters to work on in inputs. How these parameters are used in the program are explained in the following list.
- magnitude = 10 – This value is in pips. The variable refers to the distance between the high or low of a candle and the lips of the alligator. This parameter is used only for the first wise man.
- UseFirstWiseMan = true – By default, the expert advisor looks for the first wise man setup to enter the market. The first wise man refers to the bullish or bearish divergent bar as defined in chaos theory.
- UseSecondWiseMan = true – By default, the robot looks for the second wise man trade setup. The second wise man refers to a specific condition of the awesome oscillator that suggests a continuation of market momentum in line with the direction of the first wise man.
- UseThirdWiseMan = true – By default, the robot trades the third wise man setup. The third wise man refers to the fractal breakout scenario.
- lotSize = 0.01 – This is the default lot size of pending orders.
- magic = 1010101 – This unique number is assigned to every trade taken by the robot to facilitate trade management.
The Chaos Trader Lite Expert Advisor for MT4 – Entry Criteria
The trading system uses several technical indicators to find out if the three wise man setups have manifested on the current symbol. Each setup might use one or more indicators in the process of generating the signal. The three setups are explained below. While the alligator indicator is not included in the list below, this technical tool is used in principle in this trading system.
- Bullish/bearish divergent bar – A popular candlestick pattern is used in defining the first trade entry. In the mainstream, this pattern is widely known as bullish/bearish pin bar or bullish/bearish hammer. In chaos theory, the pattern is called bullish/bearish divergent bar, which is also the first wise man. A bullish divergent bar occurs when the previous candle has a lower low than the candle immediately before it and if the close price of the previous candle is greater than the median price of the same candle. A bearish divergent bar occurs when the previous candle has a higher high than the candle immediately before it and if the close price of the previous candle is less than the median price of the same candle.
- Moving averages (period 5 and 34, simple method, median price) – The expert advisor computes the simple moving average of the previous candle using a period of 5 and then subtracts the simple moving average of the same candle using a period of 34. The same computation is performed for candles 2, 3, 4 and 5. This computation is carried out to find out if the second wise man has occurred. For a bullish setup, the value for candle 1 should be greater than that of candle 2, candle 2 should be greater than candle 3, candle 3 should be greater than candle 4, and candle 4 should be less than candle 5. A bearish setup will have the opposite condition. This computation is like using the awesome oscillator to determine if the last three values of the oscillator is steadily rising for a bullish setup or steadily falling for a bearish setup, which is the original method of establishing the existence of the second wise man. See image above.
- Fractals (bar 2) – The fractals indicator is used to determine if the third wise man has taken place. A bullish setup exists if an up fractal has been printed on bar 2 and if ask price is 10 pips above the jaw of the alligator. A bearish setup exists if a down fractal has formed on candle 2 and if bid price is 10 pips below the jaw of the alligator.
Anytime one of the three setups has occurred, the expert advisor places a pending order on the current symbol. The order can be a buy stop or sell stop order with a lot size of 0.01. For a buy stop order, the entry price is located at the high price of the current candle plus one point. For a sell stop order, the entry price is placed at the low price of the current bar minus one point. If the distance of the current market price and the entry price is less than the stop level for the current symbol, the expert advisor uses the stop level distance plus or minus one point as entry price.
The Chaos Trader Lite Expert Advisor for MT4 – Exit Criteria
The Chaos Trader Lite Expert Advisor makes sure that only one type of order is present on the chart at any point in time. It will close an open order if a pending order of an opposite type has been placed. For example, if there is already an open sell trade and the robot has opened a new buy stop order, the robot will immediately close the sell trade. This operation is carried out whether the market order is profitable or losing.
Once the pending order has been placed, the robot sets the stop loss of the order next. For a buy trade, the stop loss is placed on the low price of the current candle minus one point. For a sell trade, the stop loss is placed on the high price of the current bar plus one point. If the distance between the market price and the stop loss price is less than the stop level for the current symbol, the robot uses the stop level distance plus or minor one point as the stop loss price. See above picture.
Since the expert advisor does not set a take profit target to each pending order, once the order has been converted into a market order, it can only be closed by the stop loss for a loss or by the robot itself when an opposite signal has been found, resulting in the placement of a pending order in the new direction.
The Chaos Trader Lite Expert Advisor for MT4 – Room for Improvement
The Chaos Trader Lite Expert Advisor works as designed by the creator in line with the concepts of chaos theory. The code is easy to read and does not contain errors. However, further analysis might be needed to determine how to make this trading system profitable. Trade exit is one area that must be given attention. Also, the trigger for entry might need minor tweaking to filter bad signals.