Fibo Arc 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 Fibo Arc Expert Advisor for MetaTrader4 is a fairly simple automated trading system that uses an unconventional technical tool to generate trade signals. As the name implies, the expert advisor uses the Fibonacci arc for this purpose. Along with the moving averages and momentum indicators applied on other timeframes, the Fibonacci arc helps identify and confirm a trade opportunity.
Testing done with the robot did not paint a clear picture as to the effectiveness of the trading algorithm. The testing result was breakeven at best. Anyone interested to use this robot in trading must do his own testing to run the program in different instruments and for a longer duration to be able to get a reasonable amount of data to judge the trading robot as a viable trading system.
The Fibo Arc Expert Advisor For MT4 – Entry Criteria
On every tick, the Fibo Arc Expert Advisor creates and moves the Fibonacci arc in the main chart as it interacts with price action. The robot draws the Fibonacci arc object on the chart using the open prices of the 19th and 20th bars as anchor points. Then a base line is placed (but hidden from the chart) connecting the two anchor points. From this base line, a Fibonacci arc with three levels (38.2, 50 and 61.8) is displayed on the main chart. In theory, these levels are considered support and resistance areas from which a bounce may occur after price has made contact.
After the arcs are created and adjusted, the expert advisor will check if there is a new candle on the active period, if there are more than 100 candles, take profit is more than 10 pips, there is enough free margin to open new trades, and if there is no open trade yet in the current symbol. If all these conditions are true, the robot will look for a trade entry.
There are a few parameters that the user must understand and adjust correctly as necessary so that the expert advisor performs its intended functions. These parameters are outlined below:
- Lots = 0.01 – Each trade taken by the robot is given a lot size of 0.01, but the user can use another value as he pleases.
- TrailingStop = 40 – The trailing stop function is activated when a winning trade gains 40 pips.
- Stop_Loss = 20 – An open trade will be closed in loss when price moves 20 pips against the trade position.
- MagicNumber = 1234 – This number is used to identify the trades initiated by this robot for many possible uses, such as trailing stop, trade count, stop loss adjustment and more.
- Take_Profit = 50 – An open trade will be closed in profit when price has moved 50 pips in the direction of the trade.
- UseEquityStop = true – The user can toggle the value of this parameter to true or false. When true, the account balance is protected by closing losing trades when the drawdown is no longer tolerable.
- TotalEquityRisk = 1.0 – This value defines the maximum percentage of the account balance in drawdown beyond which point losing trades are closed to save the trading account from total failure.
- Max_Trades = 1 – This value corresponds to the number of trades at maximum that the robot can open at any given time. Total open trades in the trading account cannot exceed this value. A value of one means the robot will open one trade at a time.
The expert advisor employs various technical tools in generating and confirming trade signals. The technical indicators, their settings and how the values are interpreted to arrive at a definite trade signal are presented below:
- Moving averages (period 6 and 85, linear weighted mode, price typical) – The two moving averages are applied on the next higher period, and values are obtained for the current open bar. The combination of moving averages feeds the expert advisor with information about the prevailing trend. A crossover of the moving averages is not necessary. Only the relative placement of the moving averages is needed for trend identification. If the 6 LWMA is above the 85 LWMA, the trend is up, and if the 6 LWMA is below the 85 LWMA, the trend is down.
- Momentum (period 14, price close) – The momentum indicator is applied to the next lower period, and values are generated for the previous three bars. If any of the values is less than 0.3, the signal provided by the moving averages is confirmed. This momentum value suggests that it is still reasonable to initiate a trade in one direction or another as the market is not yet exhausted.
- Fibonacci arc – While the Fibonacci arc is not technically an indicator, the robot uses its value as another confirmation tool alongside the momentum indicator. If the second previous candle opens below the corresponding Fibonacci arc and the previous candle opens above the corresponding Fibonacci arc, a buy or sell signal is confirmed. Said another way, if price crosses above the Fibonacci arc in the previous two candles, a trade signal is validated.
Once the technical tools have provided a clear and confirmed signal, the expert advisor will execute a trade with a lot size of 0.01 and with accompanying stop loss and take profit objectives. By default, the stop loss is 20 pips, and the take profit is 50 pips. Upon trade execution, the robot factors in the current spread when setting the final stop loss and take profit prices. The spread is added to the stop loss, increasing the risk in the process, and it is deducted from the take profit, resulting in lower profit by the amount of the spread.
The Fibo Arc Expert Advisor For MT4 – Exit Criteria
The Fibo Arc Expert Advisor for MT4 actively manages the open trades. Apart from the established take profit and stop loss limits, a trade can be closed at other prices within the range of the original limits. When any trade becomes profitable and acquires 30 pips, the robot will adjust the stop loss to the breakeven point. If it earns more pips and accumulates a total of 40 pips from trade entry, trailing stop is activated. From this point onward, the trade can only be closed by the new stop loss or the take profit, which lies just 10 pips ahead.
The Fibo Arc Expert Advisor For MT4 – Suggestions for Improvement
Testing was done to determine the profitability of the Fibo Arc Expert Advisor for MetaTrader4. As already mentioned, the testing result was not satisfactory. At the start of testing, the robot performed very well as shown by the soaring equity curve. However, at some point, it started to level off and then went down. It ultimately ended a little below the breakeven point.
One thing that can be improved on this expert advisor is the manner of using the Fibonacci arc. While utilizing this technical tool sounds good in theory, it seems the tool is not used the way it should be. In this expert advisor, the base line used for creating the arcs is anchored from the open prices of two adjacent candles (19th and 20th). Normally, the anchor points are the recent swing high and swing low.
A related area to look into is the process of obtaining values from the Fibonacci arc object. It appears the values are computed from the two previous candles when the Fibonacci arc object is drawn on the 19th and 20th candles. These observations suggest that the Fibonacci arc might not have been used correctly in this trading system as designed.