Hedging Zone Recovery Area 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:
- Hedging Zone Recovery Area Expert Advisor For MT4
- The Hedging Zone Recovery Area Expert Advisor for MT4 – Entry Criteria
- The Hedging Zone Recovery Area Expert Advisor for MT4 – Exit Criteria
- The Hedging Zone Recovery Area Expert Advisor for MT4 – Room for Improvement
The Hedging Zone Recovery Area Expert Advisor For MT4 is a type of martingale trading system that is designed to be used in MetaTrader4 platform. Compared to other martingale strategies that use grid, this expert advisor defines a price range called hedging zone where price may fluctuate before additional trades are taken. When price closes beyond this zone, a trade is taken in the direction of breakout with a bigger lot size, anticipating a continuation of the breakout and hoping to close all trades in profit.
Running the trading system in the back tester yielded positive results. Very few trades were taken over a period of five months of testing with historical price data, but the equity line was going up continuously with a few bumps along the way. Overall, the robot looks promising for trading. Before anyone gets too excited, he must be aware that trading a martingale system carries a lot of risk.
For this trading system, the risk lies in trading a ranging market. It appears the traded symbol during testing was mostly trending, so a positive result was generated. If the market oscillates up and down without a clear direction for a while, the robot might open too many trades that the trading account cannot handle. Therefore, further testing using various trading instruments must be done with focus on the type of market condition being traded.
The Hedging Zone Recovery Area Expert Advisor for MT4 – Entry Criteria
The Hedging Zone Recovery Area Expert Advisor completes minor checks before taking a trade. First, it counts the number of candles on the chart if it is greater than 100 and inspects of automated trading in the client terminal has been enabled. If any of these two conditions is false, the robot exits the start function and returns command to the terminal. Otherwise, the trading program will loop through the orders in the trade pool and count the open market trades. If there is none, a trade will be executed right away.
There are a handful of variables in Inputs that the user must understand and set correctly so that the trading system operates in the intended manner. These external variables and default values are discussed in the following list:
- TakeProfit = 150 – The first trade executed by this expert advisor has a take profit of 150 pips.
- Zone_Recovery_Area = 50 – This is a price range where price may fluctuate without requiring additional trades to be open. For instance, if the first trade is a sell, a buy trade will be executed if the sell trade did not reach take profit but instead moved up 50 pips above the entry price.
- Period1 = 20 – This trading system uses a fast-moving average with a period of 20.
- Period2 = 200 – This expert advisor employs a slow-moving average with a period of 200.
- MAGICNUMBER = 1111 – Each trade initiated by the expert advisor will have this unique number as reference to make trade management easier. Performance monitoring is also facilitated with the help of this information.
As a martingale trading strategy, this expert advisor does not utilize many technical indicators when looking for trade entries. Only a pair of moving averages is used to define the entry, and this is covered below:
- Moving averages (periods 20 and 200, mode simple, close price) – A pair of moving averages is used to determine the trend and the direction of the trade. The values are generated from the previous bar of the current period and symbol. If the 20 SMA is above the 200 SMA, a buy trade will be taken. If the 20 SMA is below the 200 SMA, a sell trade will be executed.
When the current symbol has no open trade yet, a market order with an initial lot size of 0.01 is taken. It comes with a take profit and stop loss limits. While the take profit is specified in Inputs as 150 pips, the stop loss is set at 200 pips, though not set down in Inputs. When the first trade did not hit the take profit target but rather went the other way, a new trade of a different type is added with two times the trade volume of the previous trade.
For example, if the first trade is a sell and it moves up at least 50 pips above the entry price, a buy trade will be opened with a lot size of 0.02. The new trade with a higher lot size is intended to prevent losses and ensure that the trading system wins all the time. It does not mean that all trades will end in positive profit, but the net profit will be positive. When the second trade failed to hit the take profit and moves the other way around, another trade of the opposite type will be opened with a bigger lot size. This trade addition continues until one trade breaks out of consolidation and takes the set of trades forward toward take profit.
The Hedging Zone Recovery Area Expert Advisor for MT4 – Exit Criteria
Every time the Hedging Zone Recovery Area Expert Advisor adds a trade, it takes the stop loss and take profit of the previous trade and assigns them to the new trade and to the next trades down the line. For example, if the first trade is a buy, its stop loss will be the take profit of the next buy trade and its take profit will be the stop loss of that buy trade. This method of trade management seeks to close all trades at one price and at one time. While this happens most of the time, it does not take place on rare occasions.
The Hedging Zone Recovery Area Expert Advisor for MT4 – Room for Improvement
The Hedging Zone Recovery Area Expert Advisor is a different breed of martingale strategy. While many traders find most martingale-based trading systems wanting and dangerous, seeing the performance of this trading system might change their minds. Using a hedge zone and waiting for price to break and close beyond the zone before opening another trade make the trading strategy a little safer.
In this system, the program does not assume something to happen but instead waits for it to occur and then take action. In this way, fakeouts are avoided. Fakeout occurs when a market seems to trade in a closely watched level or area, breaks it but then closes within the range in the end. With the waiting approach, the number of trades taken by the robot is reduced, and fewer trades mean lower drawdown.
In testing, the trading system was run for five months using historical price data in one trading symbol and one period. Only 28 trades were taken throughout the test period, and the robot managed to have a low drawdown (three percent). The winning percentage was greater than 50 percent (53 percent to be exact), which is practically adequate. The most important metric was the profit factor, which was 1.45. A profit factor greater than one means the trading system is profitable. The higher the profit factor, the more profitable the system is.
While this test result might get users excited, everyone must be aware that all trading systems involve risk and more so with martingale-based strategies. However, in this case, the martingale method is a little different from traditional martingale methods, which commonly utilize price grids or levels. There is one market condition that this robot may fail, though, and that is a ranging market. Therefore, further testing must be done by the user to determine how this robot performs in such condition.