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A Quantitative Trading Strategist's Confession

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Guest profile:

Qi Xuejun, male, born in Wuhan City, Hubei Province in 1979, graduated from the University of Science and Technology of China in 2002, began to do financial transactions in 2004. He has been using the MT4 platform up to now and is proficient in MQL4 language programming on the MT4 platform. He is the first group of professionals in mainland China to use self-edited EA for quantitative trading. His major books and courses are EA Programming Crash Course and Learning MQL4 Programming from Scratch.

1.When did you first get into trading? Was it self-taught or did you have a mentor?

Qi Xuejun:It started in 2004 at the earliest. Because the customer’s account was always losing money quickly, I started trading on my own. I read a lot of books and learnt a lot of expert experience sharing on the Internet. So, it was self-taught without special guidance. Since I saw EA trading on the MT4 platform, I have devoted myself to learning the MQL4 language, and have been using EA trading ever since.

2.Under what circumstances did you come into contact with EA trading?

Qi Xuejun:In the early days of manual trading, I often modify the stop loss of the order. At first, the stop loss was 20 points. When it was about to be hit, I adjusted it to 50 points. Then I extended the stop loss to 100 points when the 50 points are about to be hit. Finally, the stop loss was deleted and the account was liquidated overnight. After several times of such experience, I was thinking about a solution. At that time, I was using MT4, which had the function of developing EA. So, I started to write EA and learned trading with EA. Since there is no need to stare at the market quotation by using EA trading, you can avoid arbitrarily changing the stop loss. In this way, the loss will be stopped in time when it is losing money, and when it is profitable, it can also make a lot of profits, so that the position will not be closed early before earning a few points.
Manual trading is very stressful. I often sit quietly in front of the computer and sweat, underwear soaked in the cold winter. After using EA programmatic trading, I almost no longer trade manually.

3.Did you develop the best EA you have used, or did you buy it? Can you share this EA?

Qi Xuejun: The best EA I've ever used was the one I bought from a foreign author, called Forex Shocker, version 2.0, which was sold for $399 in 2011 and I paid for it with an international credit card. After bringing back it, I followed the instructions and hooked it up to 3 varieties.In the first year or so, the trading effect of this EA is very good by using an early scalping strategy. Every morning when I woke up and opened my account, I basically closed my position with profit. It was a heavy position and the commission was not bad. 100,000 dollars doubled to 200,000 dollars in a year, we took out the principal and continued to trade automatically with the rest of the money.
In the next two months, the effect of EA gradually became poor. There were several losses and the account was not profitable as a whole. At this time, I received an email from the author of EA with the EA upgrade Forex Shocker 3.0, and after the new EA is linked, the account funds were increasing again every day. My friends and I are very happy, because the account has almost doubled this year, from 100,000 US dollars to 210,000 US dollars.
But it didn't last long, and after a year or so, EA failed again, and it wasn't profitable again. And at this time, I couldn't get in touch with the author, the author's website couldn't be opened, and I still can't reach him now.

4.Do you prefer technical analysis or fundamental analysis? Which trading varieties are you good at? Can you describe your trading strategy or trading style in detail?

Qi Xuejun:I mainly use EA trading which is mainly based on indicators. Indicators are based on Candlestick data, so this is considered fundamental, but I don't do analysis. The trading varieties which I prefer are the mainstream EUR to USD,  GBP to USD, USD to JPY, and USD to CHF. The reason for choosing these is the large trading volume, good liquidity and fast transactions.
Trading strategies are nothing more than Martin, trend, scalping, grid and hedging. My own trading strategy is what I call the million strategy system. There are multiple strategies built in the program, and the number of strategies will continue to increase. Each strategy will calculate the success probability of placing an order every time a signal is issued. Orders with a high probability are automatically placed, and signals with a low probability are ignored.
In my order signal, it is necessary for some strategies to show loss signals 24 consecutive times before the next success rate will reach 99%, then an order can be formally placed. In this way, a strategy may take several days or even months before a high probability trading signal appears. In order to make up for this time deficiency, I designed more strategies to ensure that at least one strategy signal per day meets the requirements to open an order, thereby increasing the overall profitability.

5.As one of the first professionals in China who use self-programmed EA for quantitative trading, can you briefly tell us about the development process and current situation of EA trading in China?

Qi Xuejun:After MetaQuotes released its epoch-making product MT4 in 2005, EA trading gradually became popular. Then, through six consecutive World Automated Trading Championships held by MetaQuotes in 2006, 2007, 2008, 2010, 2011, and 2012, the influence of EA trading is unprecedented.
More and more domestic traders are looking for EA to trade their accounts. Initially, everyone was overly superstitious about EA, believing that EA trading will definitely achieve profit. After a long time, people gradually realized that whether EA can be profitable mainly depends on whether the built-in strategy of EA can withstand the test of time and whether it can continue to be profitable.
Nowadays, people are very mature and rational about EA trading. More investors will first fully understand the risk details of EA's built-in strategy, and then simulate and test for a period of time. After the effect is satisfied, they will use it to trade real accounts.

6.EA trading have incomparable advantages over manual trading, after all, programmatic trading is a major trend in the development of financial markets. However, in recent years, EA systems have blossomed everywhere, and many traders are looking for EAs that can make stable profits. However, such systems are rare in the market. Why does this happen?

Qi Xuejun:I think there are two reasons:
Firstly, because an excellent EA program can directly help people make money, it is a scarce resource and it is rarely normal.
Secondly, people's requirements for stable and profitable EAs are too high. Everyone hopes to find an EA to achieve that any platform, leverage, and funds will continuously earn US dollars as soon as the EA is hooked up. But the fact is that many excellent EAs are only suitable for specific conditions and cannot be profitable if the conditions are not met. There are some excellent EAs that can only make stable profits for a few months or even a year or two. Once these EAs have losses for several consecutive days, many people will deny the effect of EAs. This is also the reason why there are few EAs with stable profits.

7.For an ordinary trader, how do you truly have a suitable and "stable profit " EA system? What do you need to learn and what trading practices should you experience?

Qi Xuejun:I think there are two ways: one is to pay for it and the other is to develop it by yourself.
The EA program purchased with money must be tested by historical data, simulated account on-hook test and real fund transaction test. If the effect is not good, you have to go through the above three stages of tests repeatedly, which is more expensive and time-consuming. In addition, most of the EAs purchased with money do not have access to EA's strategic principles, thus cannot be studied and optimized by themselves. They only have the right to use, and it is difficult to create the personalized EA system of their own. The advantage is that you can quickly get the pleasure of making money.
It takes more time and energy to develop EA by yourself. First, you need to spend time learning EA programming. Secondly, you need to do a lot of EA writing to obtain a large number of strategies. Then, according to your own trading experience, integrate and sublimate to get your own trading system, and then repeatedly test and optimize, and finally form a stable and profitable EA system suitable for yourself.

8.In the trading market, many shady platforms and black-hearted salesmen often use "EA can make you earn money" as a gimmick, making traders lose a lot of money. As a veteran in this field, how do you detect such "EA scams"?

Qi Xuejun:The easiest way is to link the EA with a demo account by yourself, observe for a month, and then compare with others' public observation accounts to see if every order enters and exits at the same time, and to see if the overall effect is as profitable as the observation account. If they are all the same, the authenticity of the EA can be initially judged. At this time, you can use a small amount of money to trade with EA. If you can make a profit every month for half a year, you can increase the funds to use EA trading.

9.Many traders report that the performance of the "EA trading system" is unsustainable, and major changes in market conditions and external factors can easily lead to losses. How do we generally improve and upgrade the system?

Qi Xuejun:Most EAs are mechanized trading systems, that is, the trading strategies and trading parameters are fixed. In this way, when there are major changes in the market conditions or external factors, the EA is easy to not adapt to the new market conditions, causing losses. The solution is to make the EA a real intelligent trading system. The specific method is to add an automatic backtest and automatic optimization code to the EA, and always automatically select the best parameters for trading, which can greatly enhance the adaptivity of EA. The disadvantage is that the calculation amount of the program is greatly increased, which requires consideration of code optimization and hardware optimization.

10.What professional books would be most helpful for traders interested in EA trading? Can you recommend them to your readers?

Qi Xuejun:At present, there are not many books dedicated to EA trading. I am afraid that there will be no more than 10 books. Those who want to engage in EA trading, algorithmic trading or quantitative trading should buy them all. Novices can first read Introduction and Practice of Foreign Exchange Expert Advisors written by Liping Wang.

11.In the past trading career, are there any unforgettable things for you? Can you share it with readers?

Qi Xuejun:In the past EA trading career, the most memorable thing for me is that several accounts of EA trading have suffered losses for several months. At that time, I wanted to intervene manually, but I didn't know what to do. Several people who didn't know how to analyze the market bet on the rise or fall of the market like odds and evens. It was really painful at that time.

12.What are the difficulties that traders often encounter when learning EA trading? How can they stick to it?

Qi Xuejun:The biggest difficulty a trader encounters is that no matter how to optimize the parameter optimization strategy, the result will always be a loss. My suggestion is that if there is no hope of stable profitability for more than 5 years, you can give up this business and don't insist any longer. After all, there are very few people who can achieve stable profitability.

13.In your mind, what qualities and abilities should a good trader have?

Qi Xuejun:The most important ability that a good trader should have is to design a good strategy for himself and write it into an EA, and then when the EA is not profitable, the trader can keep it profitable through optimization and debugging.

14.Does trading work affect your normal family life? How do you deal with the balance between them?

Qi Xuejun:As the founder of New Oriental Yu Minhong said, as long as a man can bring enough money back home, all the shortcomings of the man can be ignored. Long-term losses in trading will definitely affect family life and affect the relationship between husband and wife.
When the trading can't make money, we will compromise at home, do more housework, flatter our wife, and follow her advice. When EA trading is stable and profitable, and income is increasing,wives will naturally be more gentle and considerate to us.

15.Please briefly summarize your current trading condition in a few sentences.

Qi Xuejun:EA trading is more and more stable, and people are becoming more and more free, but the overall level of domestic quantitative trading is still relatively low, staying at the stage of mechanical trading, and still far from the intelligent trading system. I want to do some training on EA algorithm trading, cultivating and getting to know some talents in EA trading.

16.In the context of the current impact of the COVID-19 pandemic on the global economy, what trading strategies or suggestions do you have?

Qi Xuejun:In the past two years of the COVID-19 pandemic, the daily trading volume of the foreign exchange market has increased sharply, reaching a huge amount of 10 trillion, which shows that more people are participating in this market, so we should study hard and strengthen research and development of trading strategies to make yourself invincible in such a huge trading market.
(Special reminder: The opinions of the guests in this article do not represent the position of this journal, nor do they offer investment advice. The market is risky, and traders must be cautious!)


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Short Comments

  • The expert in trade tells the essence of many Expert Advisors.

  • Traders’ psychological expectations are uncertain. Whether in the foreign exchange market or the stock market, traders’ psychology is an important factor affecting the market, and this factor cannot be quantified.

  • The biggest advantage of EA is to overcome the weaknesses in human nature and avoid emotional operations.

  • Like Qi, I am also an EA trader, and building systems and programming on my own is difficult but valuable.

  • Forex Shocker,现在还有多好。

  • A very persistent trader, 17 years is not easy.

  • 確實如此,市面上大多數交易系統或者交易機器人是無效的,不要隨意購買。


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