Forex Blog

Recently I was reading about the random walk hypothesis and I’ve got interested in this idea. So, I though that it would be really fun to develop a MetaTrader expert advisor that will trade completely random. No indicators or other ways to base the forecasts on the past data, just a plain “coin flipping”. After several days of coding and testing (testing mostly) the myRandom expert advisor was ready. It enters the positions based on the 0.5 probability for each direction; it has also six parameters to control its trading. I am not sure if someone will use it on their real account, but backtesting showed some positive results - so everything is possible. Please, contact me if you get some interesting results with this EA.

There are many free MetaTrader indicators available on-line, but some people still enounter problems in attaching these indicators to a chart or even compiling them when needed. This simple user’s tutorial was made by me for those that want learn attaching custom MT4 indicators.

1. Download custom MT4 indicator and save it to the ‘indicators’ folder inside the ‘experts’ folder inside your MetaTrader’s installation folder:

2. If it’s already compiled (.ex4 file) then fine, if not (.mql file) - double click it with your mouse and it will be opened in MQL editor (this editor is standard for every MetaTrader 4); click the ‘Compile’ button at the center top of the editor window - the indicator will be compiled and ready to be attached. There might be some errors or warnings during the compilation, but in most cases there shouldn’t be any. You can try and fix those errors, but usually it takes some time and programming skills to do this.

3. After you get the .ex4 file in your indicators folder (through compilation or download), you can start using it with your MetaTrader platform. All you have to do is to attach it to the chart. If you know what you are doing you might also want to change some of the indicator’s input parameters.

OK. Now you can enjoy your new MT4 indicator and hopefully - better Forex trading results.

Welcome to the January 6, 2008 edition of Carnival of Forex Trading.

Ian Welsh presents Has the Dollar Hegemony’s Tipping Point Been Passed? posted at The Agonist, saying, “Being the standard reserve currency mattered. Knowing when the switch is occuring will be important for betting the trend.”

Vahid Chaychi presents Is Forex a Suitable Job for Everybody? posted at Weboma.com, saying, “Forex is good job but it is not suitable for everybody. In addition to knowledge and experience, it needs proper mental and psychological situation.” The same author also presents another article on the topic of the Forex career - When You Will Be A Professional Forex Trader? posted the same site.

Dr. Barry Burns presents The Energy of Fractals posted at Top Dog Trading, saying, “How to see what a Forex market is likely to do in the future?” The same author also presents Good Trading MUST Feel Unnatural! Here’s Why?, saying, “Does it every seem strange how the Forex market seems to always do exactly the opposite of your trade? It’s actually the most natural thing in the world for that to happen! Here’s how to understand that and also how to overcome it.” And its second part - Good Trading MUST Feel Unnatural, Part 2., saying, “Most Forex traders do not make money because they aren’t willing to do what successful traders do. It’s pretty much that simple. Here’s exactly what successful traders do that makes them profitable … ironically the amateurs could do it too, but they honestly don’t think it’s important, so they keep looking for answers in all the wrong places and continue spinning their wheels.”

Sagar presents Comparison: Major Presidential Candidates on Monetary Policy and the USD posted at Currency Trading.net. Another article, submitted by the same author is 20 Reasons Why a Falling Dollar Isn?t Necessarily a Bad Thing.

That concludes this Carnival of Forex Trading edition. Only four authors posted the relevant and interesting articles this time, but almost all of them submitted more than one article, so there is something to read about Forex at the end of the week.

EUR/USD trend: sell.
GBP/USD trend: hold.
USD/JPY trend: sell.
EUR/JPY trend: sell.

EUR/USD showed a growth of more than 100 pips in one hour immediately after the employment data from the United States were released today. While trading flat and even falling a little during the day, EUR/USD broke through its own record level setting a new historical maximum to 1.4824.

Nonfarm payrolls growth was expected to fall from 94k in November to 70k in December, but the released data was a real catastrophe - just 18k growth. Meanwhile the unemployment rate rose from 4.7% to 5.0% showing that the problems in the U.S. economy are going to be really serious.

ISM services index in December showed a less dramatical decline dropping to 53.9% from 54.1% in November, while a drop to 53.5% was expected.

Backtesting MetaTrader expert advisors on historical data is a good way to test a strategy. But testing on the limited data supplied with MT4 installation gives a very poor quality of testing (usually below 50%). So, how to achieve a 90% quality in backtesting of MT4 expert advisors? It’s not that hard really, just follow this simple tutorial and you will able to test any MetaTrader EA.

1. Download a new MetaTrader 4 installation and install it to a separate folder. Be advised that a good MetaTrader historical data take up a lot of disk space, so install it to a drive with at least 1-2 Gbytes of free space. For download MT4 installation I recommend official MetaQuotes site.

2. After you install your MT4, don’t run it yet. Go to the folder you have installed it to. Go the ‘history’ folder there and delete all folders there (the actual folders names inside the ‘history’ folder may be different from those on these pictures):

3. Run the newly installed MetaTrader and open a free demo account with whatever broker it will be offering to you (official MetaQuotes installation offers random brokers for demo account opening in its MT4). Login to your account and close all open charts (if any).

4. Adjust the MetaTrader options to allow larger charts (more bars in history):
The close your MetaTrader.

5. Download a quality historical data for every currency pair you want to test your expert advisor on. I recommend Alpari History Center for this - download M1 data for each of the currency pairs you need.

6. Unzip the archive with M1 historical data somewhere. Rename it to comply with MT4 standard naming - i.e. EUR/USD M1 chart should be named EURUSD1.hst, GBP/USD M1 should be renamed to GBPUSD1.hst, etc.

7. Copy the renamed history file to your MetaTrader’s ‘history’ folder into your broker’s folder (overwrite if prompted):

8. Launch MetaTrader 4 again. Don’t open any charts on-line, open your downloaded M1 chart offline (example shown for EUR/USD chart):

9. It might take some time for the actual chart to load, but it’s OK. Now you need to convert M1 history to every timeframe you will need. For this you need to use a period_converter script which is a standard feature of all MT4 platforms. Run it from the Scripts tab and set its ExtPeriodMultiplier input parameter to the number of minutes in the desired output timeframe. For M5 enter 5, for M15 enter 15, for M30 enter 30, for H1 enter 60, for H4 enter 240, for D1 enter 1440, for W1 enter 10080, MN isn’t convertible as there is no fixed amount of minutes in one month:
10. Wait for the script to finish its work (may take up some time; it’s more than 2 years of data after all):

11. Repeat steps 8-10 for all timeframes you want to get.

12. Repeat steps 5-11 for all currency pairs you want to test your MT4 EAs on.

13. Voilà! Now you can enjoy a 90% quality backtesting and test every expert advisor you want on the time periods of more than 2 years. Good luck with your trading!