Development of forex trading robot with money management

Abstract

There are three important factors to manage in forex trading: trading analysis, risk management, and money management. The previous paper [ABE17] develop some robots that can analyze forex market based on technical analysis and fundamental analysis. Technical analysis works based on indicators and historical data. Fundamental analysis works based on forex-related news and events that affect forex trends, news reports, economic data, and political events. The result from these experiments show that the performance of technical robots are more robust than fundamental robot.

Meta Trader 4 (MT4) is a platform to do online forex trading. In this paper, some robots are built under this platform, based on technical analysis, completed with risk management and money management. The goal is to compare the performance of technical robots that use various types of risk and money management strategies. There are four types of money management strategies used in this paper: Martingale, Anti Martingale, Position Sizing, and Fixed Lot Size. Two types of risk management used in this paper are Pending Order and Trailing Stop. Seven parameters are used to evaluate robot’s performance: total nett profit, gross profit, gross loss, maximum drawdown, total trades, maximum consecutive wins, maximum consecutive losses.

In this paper, some experiments were conducted with backtesting strategy, which use historical forex market data. Experiments show that with the same initial deposit, Martingale Strategy make the largest profit, but with quite high maximum drawdown. Anti Martingale Strategy has the lowest maximum drawdown, which is good for the trader. But on the other hand, make less profit than the Martingale Strategy. In average, the robot that uses fixed lot size for every trade, pending order, and trailing stop balance in making profit and protecting capital (maximum drawdown). With fixed lot size for every trade maintain the same risk size per trade: fifty percent possibility of win and and fifty percent of loss.