I searched the Internet for long for forex experts to talk to. Rimantas Petrauskas is one individual whose expertise will benefit readers. As both forex trader and programmer, he marries two ideals in trading – he is an expert in forex price action but is also involved in development and experimentation with 100% auto trading. He reveals his insight into Expert Advisors and the shocking way he uses them.
Forex and trading robot expert, builder of EAs for 7 years
In this interview, we talk to Rimantas Petrauskas from Lithuania. Rimantas is a forex trader, programmer, author, and he teaches forex traders how to earn a passive income with just a demo trading account. He tells us his trading philosophy and gives some tips to traders who are considering auto trading.
Rimantas: Hello everyone, my name is Rimantas Petrauskas and I am from a small country Lithuania in Europe. I have 16 years of experience as a programmer and for the last 7 years I have been involved in forex. I have created hundreds of trading robots and indicators for my customers and also created a successful trading strategy which have doubled an account in 12 months and did this twice. I have been using it to trade my own account and sell its trading signals to other traders.
Me: Tell us how you trade forex?
Rimantas: I have tried lots of trading strategies, who hasn’t, right? ☺ And what I like most is breakout trading, which is what I use in my own trading system. I use high time frames like 4-hour or even daily and do not mess with the lower ones. What I have created is my special formula for identifying breakout levels and trading them is basically simple as opening BUY orders when price breaks the upper/resistance level or opening SELL orders when price breaks the lower/support level. So this gives us like a price channel and I trade when the price breaks out of that channel. For stop loss I usually use the other side of that channel and for take profit I mostly use fixed 100 pips value.
Reasons trading robots work and FAIL
Me: We understand that you are a developer of Expert Advisors or EAs aka trading robots. Do you use 100% auto trading or some kind of semi-auto approach?
Rimantas: I love 100% auto trading, but reality is that it might not work well in the long term. This is why there are no trading robots that are winning and earning money year after year after year. If you have been trying to find 100% auto trading robot to make money in forex you probably faced the same ugly truth that none of them work actually. You might get lucky and find one of few that will make some profit in a few months, but the reality is that sooner or later they all fail.
You might get lucky and find one of few that will make some profit in a few months, but the reality is that sooner or later they all fail.
I would lie if I say that I am different. I have experienced the same problem with my trading strategy as well. Obviously I wasn’t able to trade forex markets full time so what I have done is that I have created a trading robot using my own trading rules. It was working quite well and even doubled an account in 12 months and it did this twice. First time it did this with my demo account and then it did this with my real money account. I will be completely honest with you guys and share the ugly truth that my trading robot is doing not so good in 2014 and that made me look at this more seriously. Hopefully you will learn from my mistake and will constantly monitor the performance of your trading robots and keep improving them.
This brings us to the next point I would like to mention and that is a semi-automated trading. There are a lot of ways to do this, but in my opinion what is the most important in forex trading is fundamental analysis. I have been learning a lot about this for the last few months and what I have come to is that fundamental analysis is 80% of what you forex traders should be doing.
All technical indicators will never show us the direction of the price, after all they only show us what have happened and they are based on the price. It’s like driving a car by looking only to a rear view mirror. You might do well for some time, but eventually your car will crash into something.
Traders say that most indicators are lagging and show the price moves too late, but what do you expect from them? They are based on the price itself, so obviously they will only show the direction of the price only after it has moved in that direction. Indicators cannot show us the direction where the price will be moving.
Technical analysis is good to determine a better entry point, but what the main direction of a currency pair can be predicted well only from fundamental analysis.
This is why most trading systems and robots fail. They are trading in both directions. In other words they are trading the main trend and its retracements. This is where lots of bad trades happen.
This is where semi-automated trading comes in place. You determine the main currency pair direction and then set your auto trading robot to trade only in that direction. For example news for EUR in September are really bad and EUR/USD pair is going down. What regular auto trading robots would do is they would open SELL trade when price is going down and on the retracements they would open a BUY trade. In some cases these BUY trades might turn out winners, but this is trading against the main trend. A smart trader should wait for a price to go up a bit and then sell it again with the main trend, instead of buying it in the direction of the retracement.
There will hardly be a trading robot who can do fundamental analysis, so this must be done by analysts or the forex trader himself. And once he determine the main direction for a currency pair he should set his trading robot to trade only in that direction. So at this point trading is still fully automated, but the fact that we need to set the main direction for it makes it a semi-automated robot.
His favourite EAs
Me: Please tell us your favorite EA and what it does for you.
Rimantas: I have a few EA’s. All of them were created by me obviously ☺
First I would not trade forex without my special EA that I call ‘Trader on Chart‘. When people see this simple tool they cannot believe how easy it gets to open trades on MT4 platform. There is nothing hard in opening a trade on MT4, but when it comes to calculating the right lot size things can get difficult. I like to risk 1% per trade and it would take me a lot time to calculate the right lot size every time. Trader on Chart does that for me in just 1-click.
This is how ‘Trader on Chart’ looks on MT4
Second tool that I like to use and use it a lot is a trade copier software. With this software anyone can become an independent money manager and trade forex for their clients. What I like with this software is that it can reverse trades, so if you have a losing trading strategy it can be reversed on another MT4 account which would become a winner. It’s not as easy as it sounds and I have been running a lot of tests with this lately, but I can say that it is possible to make money in forex if you are a really bad trader. Sounds crazy, but if you make 10 BUY trades and lose them all on your MT4 account, you can reverse those trades on another MT4 which would produce 10 winning SELL trades.
Forex trade copier software – the nemesis of bad trades and a real winner
Manual trading but automate trade management tasks
Me: Here at the TerraSeeds community, we are manual traders inspecting price action but we do believe that some level of automation is good. For example we have our TX auto alert. It is driven by Fibonacci concepts but we don’t use it to auto trade. We use it to send us alerts and then we confirm with our judgment by looking. So it is a kind of automation to help us in time management. If we invite you to convince us that EA is good, what would you tell us?
Rimantas: Actually I would say that this is a great way to trade forex markets. Auto trading will never be as accurate as manual trading, because robots do not have that human judgment. I would say this is a great tool, but if you ask me how it can be improved to make things more automated, I would say that additionally it could become a trade manager. For this to be possible it should be converted into an Expert Advisor, because indicators cannot perform trading actions. So instead of just analyzing the markets and sending alerts, this tool could also manage a position after the trader opens it. What I mean by that is that it could place a stop loss and a take profit according to the rules of this trading strategy and perhaps offer automated trailing stop or break even options.
So this does not make trading fully automated and the trader decides when to enter and if enter the market. Additionally it could calculate the right lot size using recommended stop loss and entry price to risk X amount in percentage of the available account equity.
Of course it could be possible to change this into a fully automated strategy trading robot, but I believe that semi-automated trading can bring more success.
Me: In our community, we encounter different types of people. There are 2 prominent groups:
A) One believes that one should learn manual trading because it equips one with a lifetime skill.
B) The second wants to pick up an EA to auto trade. He does not know how to trade but believes that he can choose a successful product based on performance statistics.
What would you say to group A and B if you talked to them separately.
Rimantas: Group A is going the right direction and would probably avoid many problems that group B will face, because there is no successful auto trading robot that will make money in the long run. There might be some at the moment, but later they just disappear after they stop working and in most cases people lose money when using them. However, following trading signals from a reputable trader can become a great income source for group B. So when we think more about this, when groups A will learn how to trade they can provide trading signal service to group B and both sides can make money that way.
And when we speak about trading signal business I would mention that I have been working in this space for the last few years and even wrote a book about how to start such business. It is the opportunity that every forex trader should take. Helping others to make money in forex is a great way to make money yourself and it can become a really well paid job.
Critical success factor as a EA programmer
Me: We also encountered many young individuals who are very keen to develop their own EAs. Please tell them your critical success factor as a programmer.
Rimantas: Developing EA is really an easy job to do. I like to say that even 13 year olds can create EA’s these days. For those who just started learning this process I would say that there is no better place to learn than http://docs.mql4.com site. If a person would spend the whole day reading the documentation on this site I am sure the next day he can start creating his first EA. What is even better to do is taking someone else’s EA and trying to adopt it to fit your own requirements.
Developing EA is really an easy job to do. I like to say that even 13 year olds can create EA’s these days.
The number one mistake that people make when they want to learn programming is that they do not want to spend any time reading documentation about the MQL4 programming language. So even if you are a programmer already it is never too late to go on that website and read as much as you can. There are also lots of examples how EA’s should be created and people who will dedicate time to try this will definitely become programmers.
I would say you need three things to create an EA for yourself.
- Read as much info as possible on http://docs.mql4.com to get familiar to how it works. Even if you won’t understand at first what you are reading, don’t stop. You will figure this out when you will read more and more.
- You need a clear goal what you want to create. What your EA should do? If you do not know what you want to program you won’t be able to program it.
- Dedicate time for this. If you are really serious to become a programmer and create EA for yourself or even other people, you will have to spend time on this. I will be honest with you and say that programming takes a lot of time. Sometimes you create EA in an hour or two and sometimes you get stuck with some error or a bug in the code and fix it only in 12 hours. This is quite normal to spend 12 hours trying to fix some small bug in the EA.
Advice to individuals making a living trading forex
Me: What would you advise individuals to do to make a living trading forex?
Rimantas: If you want to make a living trading forex then you should never blindly trust automated trading robots. Marketers use many tricks to convince people that their trading robot is the best and is the next big thing that will make you rich. Unfortunately the reality is different. Manual or semi-automated trading is the way to go. I would suggest you to make your trading activities easier by using special trading tools that fit your needs, but never blindly trust automated trading robots.
Manual or semi-automated trading is the way to go. I would suggest you to make your trading activities easier by using special trading tools that fit your needs, but never blindly trust automated trading robots.
My take from Rimantas Petrauskas
Go manual or semi-manual because 100% auto trading performance is short-lived
Rimantas has given us his insight and personal encounter with trading robots both as a programmer and user. He tells us that manual or discretionary trading is the way to trade although there is room for automating trade management. A trader who understands his craft can naturally order or purchase EAs that handle these specific tasks.
He also tells us that most trading robots are short-lived – operating profitably for a few months, then failing suddenly. From what I hear from other traders who venture into auto trading, markets move through different stages. One robot that does well in a trending stage may fail in a range. What Rimantas says in this interview reinforces this observation.
There is also one particular observation that I agree with very much.
What regular auto trading robots would do is they would open SELL trade when price is going down and on the retracements they would open a BUY trade. In some cases these BUY trades might turn out winners, but this is trading against the main trend.
Many trading robots were not develop to follow trend. They were developed to follow simple rules like BUY OVERSOLD and SELL OVERBOUGHT and to do both. When a currency pair trends, only one trade is the right one. The other is going to be counter-trend. This also reinforces personal accounts that many traders have given to me that trading robots get trades right 50% of the time only.
Trade copier is a crazy idea but here’s how it can work
I must say I did not understand Rimantas’s account of the trade copier that I had to write him to clarify. Here’s my understanding: when you turn on the trade copier, it is going to produce two sets of results – one bad and one good. Now even if the net result is profit, it is still a sad proposition because it is a lot of effort and set up to make very little money. I don’t in any way see how anyone can reject one set of results if both are run on live trading accounts.
But here is a totally wicked way for a risk-taker to make money: find a robot that has an absolute proven track record of losing, run it on a demo account and set up the trade copier to deliver and reverse the trades so that losing positions become winners on the live account. Amazing!
Finally, Rimantas reveals his shocking approach!
The entire interview can be summed up in this last two sentences Rimantas shared with me.
I do not suggest auto trading myself, unless it is built using proven trading rules that you trust. I have been involved into auto trading for long enough to know that in the long run it will not make profit.
Trust only EAs built based on rules that you can understand because the rest sucks!
Please visit Rimantas Petrauskas at www.ea-coder.com. I am looking forward to tap his expertise further in future.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."