7 misunderstandings about EA that kept most Traders from reaching their targets

7 misunderstandings about EA that kept most Traders from reaching their targets

Many people started using EA in the belief that

"Buy EA and let the system work. There will be a profit."

But the truth is, EA does not automatically turn an unfounded trading system into a better one.

EA is just a "tool" that systematically brings trading rules and strategies to work.

And here are 7 misunderstandings Trader should know before using EA.

1.Buy EA = Buy Profit

This is the most important misunderstanding.

EA is not a money printer and does not create a trading advantage.

If the Strategy has no advantage, turning the Strategy into automation does not solve the problem at the root.

2.Win Rate High = EA Good

Win Rate 80% or 90% may seem interesting, but this figure alone does not tell the quality of the system.

Must be viewed in conjunction with Risk / Reward, Drawdown, Risk-to-Time Scale, and System Behavior at Continuous Losses

Systems that win often, but can lose heavily on the wrong track, can also be highly vulnerable.

3.Backtest Profit = Practical use, need profit

Backtest is an important tool, but not the whole answer.

Pretty test results can be caused by choosing too many Parameters that suit historical data, or different test conditions from the actual market.

After Backtest, therefore, Robustness, Forward Test and system behavior must still be investigated under different circumstances.

4.Good EA requires all markets

No Strategy needs to suit every Market Condition.

Trend systems following may work well when the market is trending, but run into problems during Sideway.

On the other hand, systems designed for the Sideway market may not cope well with Strong Trend.

The important thing is therefore not to find an EA that is "available to all markets."

But to understand what conditions our system is designed to work under.

5.Indicator a lot = EA smarter

The number of Indicators does not equal the quality of the system.

Adding too many conditions can unnecessarily complicate the Strategy, and risk over-adapting the system to past data.

A good system should have an explanatory, testable and reasonably accommodating Logic.

6.Already have EA, ignore Risk Management

On the contrary, sir.

Automation makes it possible for the system to open commands quickly and consistently.

If the risk management rules are wrong, the system can do the wrong thing "effectively."

Position Sizing, Maximum Drawdown, Stop Loss, Exposure and Risk Limits should therefore be thought of from the system design stage.

7. The problem is always the code.

EA can write 100% correct code according to Requirements, but the system still loses.

Because Coding and Trading Strategy are different.

The program serves to turn Logic into a command that the computer follows.

But the more important question is

Logic that we have computers do that. Is there a reason and a statistical advantage?

This is why EA development should not start with the question of whether

"How to write code?"

But it should start with

"What kind of Trading System are we designing?"

EA is not a money printer.

An EA is the part of the system that consists of

Strategy + Risk Management + Execution + Testing + Monitoring + Continuous Improvement

Looking at EA like this, we stop looking for "EA that is profitable all the time."

And start learning that

How should a good trading system be designed, tested and administered?

This is the view of Trading Engineering.

Save this article as a basis before starting to use or develop EA and systematically following G8 Corporation for Algorithmic Trading, EA Development and Trading Engineering.

# EA # AlgorithmicTrading # Auto trading system # Developing EA # MT4# MT5 # TradingSystem # RiskManagement # Backtest # TradingEngineering