Development of Momentum-Based Trading Bot for MetaTrader 4 (MT4) on CMC Markets

Project Overview

Develop a custom automated trading bot (Expert Advisor) for MetaTrader 4 (MT4) that executes trades on the S&P 500 index CFDs via CMC Markets. The bot will implement a momentum-based trading strategy that utilizes technical indicators for market entry and exit signals, incorporates dynamic stop-loss orders, adjusts position sizes based on market momentum, and adheres to strict risk management principles.

Technical Requirements

1. Trading Platform: MetaTrader 4 (MT4)

2. Broker: CMC Markets (ensure compatibility with their MT4 offering)

3. Trading Instrument: S&P 500 Index CFDs

4. Programming Language: MQL4 (MetaQuotes Language 4)

Strategy Details

1. Market Momentum Identification

• Technical Indicators:

  • Moving Averages (MA): Use a combination of short-term and long-term MAs (e.g., 50-period and 200-period EMAs).
  • Relative Strength Index (RSI): 14-period RSI to gauge overbought and oversold conditions.
  • Moving Average Convergence Divergence (MACD): Standard settings (12, 26, 9) for momentum confirmation.

• Entry Conditions:

  • Long Positions:
    • Price crosses above the 50-period EMA.
    • RSI is above 50 but below 70.
    • MACD histogram crosses above the signal line.
  • Short Positions:
    • Price crosses below the 50-period EMA.
    • RSI is below 50 but above 30.
    • MACD histogram crosses below the signal line.
  • Confirmation: All three indicators must align to confirm a bullish or bearish trend before entering a trade.

2. Stop-Loss Implementation

• Initial Stop-Loss:

  • Long Positions: Set stop-loss at the nearest significant support level below the entry price.
  • Short Positions: Set stop-loss at the nearest significant resistance level above the entry price.
  • Alternative: If support/resistance levels are not clear, use a fixed stop-loss of 1% of the instrument's price.

• Trailing Stop-Loss:

  • Implement a trailing stop-loss that adjusts the stop price as the trade moves favorably.
  • Parameters:
    • Trail by X Points: Specify the number of points to trail (e.g., 10 points).
    • Activation: Trailing stop activates once the trade is in profit by a predefined amount (e.g., 5 points).

3. Position Sizing and Scaling

• Risk Per Trade:

  • Limit risk to 1-2% of total account equity per trade.
  • Calculate position size accordingly.

• Scaling In (Pyramiding):

  • Conditions for Adding to Position:
    • Trade is in profit by a predefined amount (e.g., 10 points).
    • Indicators continue to confirm the trend.
  • Additional Entries:
    • Add positions at predetermined price intervals (e.g., every 10 points of favorable movement).
    • Each additional position must also adhere to the 1-2% risk rule.
  • Maximum Number of Additions: Limit the number of additional positions to prevent overexposure (e.g., maximum of 3 additions).

• Scaling Out:

  • Optionally implement scaling out of positions by taking partial profits at certain levels.

4. Exit Strategy

• Indicator-Based Exit:
  • Close the position when any of the following occurs:
    • Price crosses the opposite side of the 50-period EMA.
    • RSI crosses back below 50 (for longs) or above 50 (for shorts).
    • MACD histogram crosses the signal line in the opposite direction.
• Profit Target:
  • Optionally set a take-profit level at a predefined percentage gain (e.g., 5% profit).
• Time-Based Exit:
  • Close any open positions at the end of the trading day to avoid overnight risk (configurable option).

5. Time Frame and Trading Sessions

• Time Frames:

  • Primary chart time frame: 15-minute chart for intraday trading.
  • Indicators should be calculated based on this time frame.

• Trading Sessions:

  • Operate during specific market hours (e.g., 9:30 AM to 4:00 PM EST).
  • Option to configure active trading hours.

Risk Management Principles

• Diversification:

  • The bot should not open multiple positions on highly correlated instruments simultaneously.

• Maximum Concurrent Trades:

  • Limit the number of open positions at any given time (e.g., no more than 5).

• Error Handling:

  • Implement safeguards to handle trade execution errors, disconnections, or other technical issues.
  • Include logging of errors and notifications.

• Capital Protection:

  • If account equity drops by a certain percentage (e.g., 10%), the bot should cease trading and send an alert.

Additional Features

1. User-Defined Parameters

• Allow customization of key parameters without modifying the code:
  • Moving Average periods and types.
  • RSI period and threshold levels.
  • MACD settings.
  • Stop-loss and take-profit levels.
  • Trailing stop parameters.
  • Risk percentage per trade.
  • Trading hours.
  • Maximum number of positions.

2. Logging and Reporting

• Trade Logging:
  • Record all trade entries and exits with timestamps, prices, and reasons for actions.
• Performance Metrics:
  • Provide summary reports on trading performance, including profit/loss, win rate, and drawdowns.
• Alerts and Notifications:
  • Send alerts for significant events (e.g., new trades, errors, reached profit targets) via email or MT4 notifications.

3. Backtesting and Optimization

• Ensure the bot is compatible with MT4's Strategy Tester for backtesting.
• Code should be optimized for efficient performance during backtests.

Technical Specifications

• Coding Standards:

  • Clean, well-documented code with comments explaining key functions and logic.
  • Modular design to facilitate future updates or modifications.

• Compliance:

  • Adhere to all of CMC Markets' trading rules and MT4's technical requirements.
  • Ensure the bot complies with regulatory standards applicable to automated trading.

• Security:

  • Implement measures to protect against unauthorized access or execution of the bot.

Delivery Requirements

1. Timeline:

   • Estimated project duration: 4 weeks
     

2. Deliverables:

   • Compiled Expert Advisor (.ex4 file) ready for installation on MT4.
   • Source code (.mq4 file) with full documentation.
   • User manual detailing installation, configuration, and usage instructions.
   • Backtesting results on historical data demonstrating the bot's performance.

3. Testing:

   • Perform thorough testing to ensure the bot operates as intended.
   • Fix any bugs or issues identified during the testing phase.

4. Support:

   • Provide a period of post-delivery support for troubleshooting and minor adjustments (30 days)
     

Acceptance Criteria

• The bot must execute trades accurately based on the specified strategy.
• All user-defined parameters must be adjustable through the bot's settings interface.
• The bot should run smoothly on the MT4 platform without causing crashes or significant performance issues.
• Comprehensive documentation and user guides are provided.
• Successful backtesting results align with the strategy's expected performance.

Confidentiality and Ownership

• All code and materials developed are the exclusive property of the client upon full payment.
• The developer agrees to keep all project details confidential.