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Hey, everybody. Welcome. Happy Friday. It’s live on YouTube Friday. Friday? Friday is live. Friday is live on YouTube live. I got a package here from YouTube, and I thought we take a look at some of the tickets, some of the trouble tickets, some of the questions that came in.
Oh, check this out. This is a BookArc for MacBook. It’s like a little jacket sleeve thing for my MacBook over here.
Updates on stuff that happened this week, somebody asked me a question today about, “Hey, Rob, what do you think about trading Bitcoin?” and my friend, Bill, wrote and said that his son was interested in trading Bitcoin, and I thought to myself, “Hey, self, that’s a good question,” so what I did was I went over to Poloniex, P-O-L-O-N-I-E-X, and I opened up an account at Poloniex. I just decided I’d go ahead and do it, and this is going to be interesting, and I’m going to try trading some of these cryptocurrencies. That’s like the major broker for trading cryptocurrencies.
I want to see if I can set my MacBook up on this. Let’s see how this works. Okay, that looks pretty good. It’s kind of weird.
Yeah, anyway, another question, “Hey, Rob, how do I know when … How do I know when a robot is ready to be traded live?”
There’s a process for that, and why don’t we give this a shot? I’m going to grab a piece of paper and I’m going to put it on the whiteboard. Let’s do this. I love these giant … Look at these giant Post-it notes. All right, let’s see here. I’ll grab one of these suckers, and we’ll see how this goes. Come on.
How do you know when a robot is ready? Right? Number one on the list is you create a hypothesis. Looking back on the charts, you’re scrolling through or looking at one of the trading books that you have on your shelf, you create a hypothesis. As we talked about this week, it starts with “this happens and that leads to next … something else happens,” so you create a hypothesis.
The next thing that you do is you chart test it. You test it on the charts, and you just scroll back in time and you spot check it like I did on the webinar this week. I spot checked the new robot for the Mexican peso, this ADX breakout robot that I’m so excited about.
As a matter of fact, Andrew, our friend in the lifetime membership already ran a simple test on TradingView.com on the 1-hour charts, and the results looked promising, and we will have that robot ready reasonably soon.
You chart test it. You go back in time on your charts and you look at every example that you can find and you say, “All right, this either does or it doesn’t look like it’s working on those historical charts.”
The third thing that you do is you program it, but you only program it after you do those two things in my humble opinion. You program it and, to program it, you look at websites like Upwork.com or maybe you look up our friend Andrew Palladino in the lifetime member chat room and you offer to pay him, I don’t know, a thousand dollars to develop your robot. Then you program it, but you’re not done after you program it.
Let’s say you get it back from the programmer, and then what you’re going to do next after that is you’re going to back test and refine, and that means you’re going to test it over historical data and you’re going to see if your theory really works when you actually follow the rules of the trading system that you created.
When you actually do that, does it actually make money? More often than not, the answer is no. You’re going to get it back from the programmer and that back test is not going to work. It’s going to look like your robot blows, and that’s going to be super frustrating. That happens to me almost every single time when I get a robot back, from back testing, so then what I have to do is I have to refine it.
Here are some things that you can refine, although there’s no more room on the chart. I’m going to write it really small. All right? You can refine the profit target. You can refine the stop loss or you can refine your indicator settings.
When you refine these settings, one thing to concentrate on is your stop loss. Oftentimes, your robot will stop out too quickly, and then it can’t make any money because it’s closing out all these losing trades when, in reality, if it had a wider stop loss, then it wouldn’t be a problem, so test out a wider stop loss or even removing the stop loss at first to see what happens.
The second thing you can test is a smaller or larger profit target. The smaller the profit target, the more profits you’re going to get, meaning, the more profitable trades are going to close and your win percentage is going to go up. The size of those wins are going to be so small that it might not offset the losses that you take, so you might also, as a next refinement, test out a really big, big, huge profit target to see if having that huge profit target can swing the results in the positive direction.
That’s the process that I use to back test, refine, and get a robot ready. If you’re watching on YouTube live, that’s great. I hope this worked. You can click the “subscribe” button to get more videos like this all the time. If you’re not a lifetime member, click here for you to get membership so you can talk to Andrew Palladino and me and a bunch of other robot traders to see how we’re doing and to get your own robot up and running.
We’ll see you next time. Thanks.