I made a Trading Bot and told it to take 100 Trades, and just to help him a little, I showed
him the direction of the trend. If this trading bot can make money simply by taking 100 Trades
in the direction of the trend, I think we all can agree that Bill the Trading Bot will
be better than 90 percent of traders. But that's kind of scary because robots are not
only taking over people's jobs but can also trade better than 90 percent of traders.
The first thing we need to do is find the brokers that will let you take trades using
a bot. So after some googling, I found one, and...
We need to learn a new language. And two weeks later, I wrote some code and it somehow worked!
Okay Bill the Bot, take over my job.
But how are you going to make the bot trade successfully you ask? Well, the secret ingredient
is not a high win rate trading strategy, not even the MACD strategy that got a 60 percent
win rate, no-no-no. All we are going to use is the holy grail of trading! Money Management!
But can it really make money with just money management? Don't you need at least a strategy
for entry signals? That's a good question, but Bill the trading bot already has two things
better than a human. It does not think with emotions, and it can actually follow a written
trading plan!
But first, we will need a baseline. If Bill the Bot actually makes money after 100 trades,
how do we know it was actually better than average? First, we will tell Bill the Bot
to take 100 random trades in total on 10 different charts. I created a demo account for this
experiment where the commission was included in the spread, and the entry timeframe was
set to 1 minute. Since the spread on the smaller timeframe is sometimes too big, I waited and
told Bill the Bot to only take trades during the New York and London session, where the
spreads are lower and the price movement is good. When we will take 100 random trades,
we are expecting the Bill the Bot to end up with a small loss at the end.
In the first experiment, Bill the Bot took 10 trades in total on different pairs every
5 minutes. Bill the Bot first looks at the last traded price, then sets the stop loss
and profit targets at a good distance away from the entry price. You can see where it
decided to set the profit and stop loss on the left side. On the right, you will see
if the trade is making a profit or not, and the position size. Here you will see if the
account balance is going up or down, and the available margin. I actually ran this experiment
before, but the trading bot ran out of margin because the position size was too big. So
I told Bill the Bot to reduce the position size per trade, and it looks like he is successfully
taking 10 trades at a time.
The account was up by 100 dollars at one point, but when Bill the Bot took 100 trades in around
50 minutes, there was a small loss even after commission just like expected.
I downloaded the transactions and opened it using Excel, and Balance Graph was looking
really flat. You can see that the price made a move in the downward direction at the start,
then made a move in the upward direction, made a profit, and then slowly made a move
in the downward direction, and made a loss of approximately 26 dollars.
This will be our baseline.
If Bill the Bot can make more money than this by trading in the direction of the trend,
it will be better than 90 percent of the traders. But then I noticed that multiple pairs have
the common currency on the same side. There is USD on the right side, and there is USD
again 3 times on the same side. If the price on USD falls, the four pairs can move in a
similar pattern.
In the second experiment, Bill the Bot will take 10 trades on 10 pairs every 5 minutes,
but this time, it will take opposite trades on these similar pairs to see what happens.
Since last time a lot of margin was left unused, I told Bill the Bot to increase the position
a little. First, it took a trade on Euro USD, then on GBP JPY, and then on GBP USD, and
then it lost money. It took 100 trades in the second experiment and only made a small
loss just like before.
I opened the transactions using Excel and looks like the price made a move in the downward
direction at the beginning, but then went in the sideways direction.
Since the loss after 100 random trades was around 700 dollars, can Bill the Bot trade
in the direction of the trend, and make significantly more profit than what it lost in the third
experiment? I found the GBP JPY chart that was up trending on multiple timeframes. So
I told our little Bill to take long trades on this pair every 1 minute.
Without a proper trading strategy, Bill the trading bot doesn't have much luck in getting
a high win rate.
Bill is pretty much taking random trades, and the only things in his favor are the trend
direction and money management. If you take random trades, you will most likely get a
win rate of around 50 percent. But since there are charges for taking trades, you will make
a small loss at the end. In this case, the commission is included in the spread. So as
long as Bill the Trading Bot makes money just above 50 percent of the time, it will not
lose money, something that many traders struggle to do.
When it will take trades every minute in the direction of the trend, more trades will end
up in profit, because the price has a higher probability of moving in the direction of
the trend.
But Bill can't be silly and risk more money per trade because if the price makes a sudden
move in the downward direction in this uptrend, Bill the Bot will lose a lot of money.
So instead, we are going to make Bill do the smart thing. We are going to make the bot
risk less than 1 percent of the account per trade. So when it will take multiple trades
at the same time, it will be similar to averaging but in the direction of the trend.
But now, if you noticed, the trading bot is not using a lot of margin even though it is
taking multiple trades at the same time. So I told him to use that extra margin to take
trades on other pairs.
Now, the Bill the Trading Bot is taking 2 long trades every 1 minute. One on the GBP
JPY pair, and one on the Euro USD pair. Both of these pairs are trending in the same direction
in the long run. I adjusted the profit loss distance for the Euro USD pair and let Bill
the Bot take 100 trades on its own. Now that we are taking 2 trades at the same time, we
are actually taking 200 trades in total. Let's see how Bill the Bot takes around 200 trades
on its own.
It must be Bill's bad luck or that beautiful face that got the price overexcited, but the
price made a sudden big move in one direction.
This move is probably caused by some news. On the Euro USD pair, the price made a strong
sudden move in the downward direction, which means the stop losses are going to get hit.
On the other hand, the price on the GBP JPY started to make sudden strong moves in the
upward direction.
Now you might think, if the price is suddenly going towards the stop loss on one pair, and
towards the profit target on the second pair, one should make a loss and the other one should
make a profit right?
No!
The price not only made a loss on the first pair, but it also reversed just before triggering
the profit targets on the second pair and made a loss. Because of this news event, the
account was down more than 1000 dollars.
Now Bill the Bot not only has to recover this loss with its just above 50 percent win rate
but also has to make a profit. With 2 trades every minute, it should take Bill the Bot
around 1 and half hours to take 200 trades. So if Bill the Bot can make more than 1 percent
in just 1 and half hours, it will be a big deal, because then we can run it for 24hrs
straight with a good strategy to see by how much percentage it can grow the account in
a day.
As the price began to make moves in the upward direction on both pairs as expected, more
and more profit targets were hit. The loss we made because of the news was around the
14th trade, but by the 39th trade, the Trading Bot already recovered the loss and was sitting
with a small profit.
Furthermore, it is still not using most of the available margin, which means we can tell
Bill the Bot to increase the profit per trade whenever we want.
This time when I opened the transactions in an Excel Sheet, the price was going in an
upward direction. We told the Bot to trade in the direction of the trend, and the balance
was actually moving in the upward direction. This was the balance graph of the first experiment
when we took random trades, this was the balance graph when we flipped some of those random
trades, and this, is the balance graph when we told the trading bot to take random trades,
but in the direction of the trend! The bot lost money at the beginning because of the
news, but since Bill the Bot actually followed the written trading plan with proper money
management, it recovered the loss and made a profit, then lost money again, then recovered
that loss, and made an excellent profit at the end!
Bill the bot took 200 trades in the direction of the trend in less than 2 hours and made
almost 2000 dollars in profit. That's almost a 2 percent gain in just 2 hours. If it can
make money by taking random trades in the direction of the trend, what can it do with
a high win rate trading indicator? What if I ran the Trading Bot for 24hrs with a strategy
that got a high win rate after testing 100 times on the Trading Rush Channel? Let's find
out in the next episode! That's all! Support Trading Rush on Patreon and Get to see how
I get a high win rate with the current best strategies I use. Thanks for watching!