How to Build an Algorithm

Maybe the title of this post is incorrect, as it probably should've read How I'm going to build an algorithm, as you know from previous posts I follow someone called VP from the website nononsenseforex.com he also has an amazing podcast and YouTube channel too and through his content he has given us a pathway to follow to build an algorithm to allow us to be a successful Forex trader, it wont be easy and it more than likely wont be quick either but nothing comes without a bit of hard work.

The framework he has set is as follows -

Through a series indicators layered up over each other to provide signals of when I should or shouldn't enter a trade, whether to let it run or close out early or for a loss or a profit, these will be the six steps I will take in building my algorithm.

The ATR is built into the MT4 platform is simple indicator of how the price has moved on average over the previous measuring period, default is 14 periods and will be keeping it on this setting as per VP's recommendations and I will be using the daily chart.

So with the ATR I will be trying to identify a baseline I can use to help predict price, initially whilst I try to educate myself I am just going to use a simple moving average and base it on a number of settings, specifically 8, 16, 21, 26, 30. Using a cross and and close method of once the candle has closed above for a buy trade or below if looking for a sell trade, I would then enter the market with a specific set of parameters for a trade with a stop loss of 1.5 * ATR and a take profit of 1*ATR, this does offer a poor risk to reward ratio, but that isn't what I am trying to prove here, it is a simple measurement to prove the moving average baseline theory.

As I have said this Algorithm concept is taken from nononsenseforex.com website, check it out as I found it really educational and I'm sure you will too.

Check back to my blog for regular updates on my how algo journey is going and hopefully we can all learn something together.