Engulfing with RSI Expert Advisor For MT4

Engulfing with RSI Expert Advisor For MT4

 

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!

 

The Engulfing with RSI Expert Advisor For MT4 is a simple algorithmic trading system for MT4 trading platform. It can be implemented in trading accounts whose price quotes are expressed in five or four digits for dollars pairs and in three or two decimals for yen pairs. It will trade one symbol at a time, but it can take multiple trades.

If it is desired to run the robot in multiple symbols in one trading account, the user can run multiple instances in different symbols. However, the robot looks into the aggregate results of all open trades in various symbols and will close all trades either in profit or loss if the running profit goes beyond either the lower or upper limit.

As the name implies, this robot is based on the engulfing candlestick combination and the relative strength index. This is precisely how the robot works in testing, demo or live trading. The user should be aware, though, that the trading system is not yet suitable for live trading as the testing result is not looking good at present. As the testing covered a very short period of time, it cannot be used to judge the value of this trading system. Longer testing time must be done to get a sense of its trading performance.



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The Engulfing with RSI Expert Advisor For MT4 – Entry Criteria




The Engulfing with RSI Expert Advisor for MT4 does not perform routine checks prior to looking for trade opportunities. At the open of a new candle, the robot loops through the orders in the trade pool to find market trades in the current symbol. If there is none, the robot will look at the conditions for trade entry. As already pointed out, in this system only the RSI and one candlestick pattern are being used for trade generation.

The settings for RSI and the manner of use in this trading system are explained below:


  • Relative strength index (period 7, price high) – This is not the standard setting for the RSI built in MT4. In this system RSI is being used as the primary indicator for trend direction. A buy or sell signal is indicated if the RSI line enters the oversold or overbought territory. An RSI reading above 88 is a sell signal, and an RSI reading below 37 is a buy signal. The RSI value being used is for the previous candle of the active timeframe.


Once the RSI gives a trade signal, the robot determines if the other trading condition is satisfied. This is done by inspecting the previous two candles in the current timeframe. To confirm a buy signal, for example, the second candle should have a bearish close and the first candle should not only have a bullish close but also close above the previous candle’s open. To confirm a sell signal, on the other hand, the second candle should have a bullish close and the first candle should not only have a bearish close but also close below the open of the previous candle.

Once a trade signal is confirmed, a trade is executed with a lot size of 0.01. The user can change this value in Inputs. This lot size is maintained regardless of the value of the account balance. At some point after a trade is taken, additional trades may be taken if opportunities are available, and there is no upper limit as to the number of trades that the robot will open in the trading account.



The Engulfing with RSI Expert Advisor For MT4 – Exit Criteria


The Engulfing with RSI Expert Advisor for MT4 takes market trades without stop loss and take profit orders. As such, the robot actively manages these trades to realize the profits in profitable trades and limit the loses in losing trades. The robot performs the trade management function in real time by the tick. Regardless of the number of open trades, the robot will take the aggregate running profit and check if it is less than negative 10 dollars or greater than 190 dollars. If one or the other is true, the robot will close all trades on the trading account.

If the drawdown falls below negative 10 dollars, all trades are closed for a loss. If the net gain is greater than 190 dollars, all trades are closed with a net positive profit. It is important that the user does not run any other expert advisor on the trading account, nor he takes manual trades. Otherwise, these other trades may be closed by the robot as well, and the outcome might not be favorable for the trader.



The Engulfing with RSI Expert Advisor For MT4 – Room for Improvement


While the Engulfing with RSI Expert Advisor for MT4 is a complete trading system as it can be left running on its own without manual intervention, it is not yet suitable for live trading with the default settings. As observed in the strategy tester, the trading performance of the robot is unacceptable. At the beginning of testing, the equity curve fluctuated up and down without any clear direction. After some time, it started running downhill quite strongly. Still at various points during testing the robot staged some major comeback, but those are not enough to save the day. The test run ended with the net profit in deep red.

One thing to improve on is the lot size set by default. It is best to start trading with the smallest trade volume possible and then move up later as the trading account grows. During testing it is noticed that some contiguous trades are opened too close to each other, which is not ideal in most trading systems. The trading concept on which this trading system is based is not bad at all as each element seems to complement each other. Combining overbought or oversold signal with price action is a good idea. Perhaps these two elements are not enough to succeed in trading this system. Some other elements must be added into the mix to come up with a more robust trading system. Quite possibly, the money management being implemented is not optimal. While the stop loss is significantly lower compared to the take profit target, it might not be working in this trading system as envisioned. If this is the missing piece in the puzzle, the trader must give it some serious thought.


 

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