Hey.
I’m not new in trading but super new in creating an algorithm base trading system.
I have a theory on using martingale hedging namely loss recovery system.
I don’t have a losing trade until the size got too big.
So my concern is when does the market become too volatile for my system to work.
How many position has to be open before the account gets blown up.
Reason for entry is an engulfing candle.
Entry 5 pips above current candle high.
If trigger place hedge 5 pips below current candle low.
Sequence sizing goes like this.
1, 3, 6, 12, 24, 48 etc.
Anyone advice to give to programmers if I’m outsource to freelancer?
Re-evaluate your system with a stop in the place of a “hedge”.
Hedging at best provides no financial benefit and at worst means extra spread and interest carry costs. All hedging is is an alternative accounting system - one which can completely muddle the proper analysis of a system’s or methodology’s performance.
To prevent your account from getting blown up you need a stop or hedge method in place to do so. The cleanest way to do this is to simply have the programmer set a “Close all positions” parameter in the EA. You can have it to where you insert a price level, or have it set to an indicator. For volatility based strategies, try employing the ATR indicator. I use the ATR all the time for entry and exit orders, and I have an ATR moving average custom indicator as well, i.e. if the 14 period ATR goes about the 100 period ATR, then that allows the strategy to trade because volatility is higher than the longer average. This prevents trade entries in low volume low volatility sessions.
Hope that helps.
But after deduction. It is those volatile times that creates too much fake moves. How reckon you in the parameters should I let them know?
Then perhaps you want the opposite, such as when volatility gets too high the EA stops trading? You can try using Bollinger Bands and have the programmer to allow you to adjust the BB parameters to where the EA will stop trading. So that way you can stop trading when the BB get too wide. Also make sure they allow you to adjust the period used. Then run some optimization a to see which BB levels and period is best.
The easier way I use is I had an indicator developed that has a short period ATR and a slow period ATR. For you, you can have the EA stop trading when the short period ATR is above the long period ATR because that means volatility is higher than usual. Using this type of indicator allows you to easily use it for any currency pair with the same parameters instead of having to constantly adjust the single ATR for each different pair manually.
what is the number for short period ATR? default one 14? slow period ATR?
Regards
David
This is a custom indicator I had created for me. I use the 12 period and 88 period ATRs because that was the optimal settings for the strategy I use when optimized. If you have the indicator developed for you, or do it yourself, then you’ll have to optimize it to your strategy.
Since my strategy is intraday trading, I wanted the long period ATR to represent approximately the last 24 hours of trading so it covers all global sessions. The thinking is that when the short ATR is higher than the long ATR average over the last 24 hours, then volatility is relatively high and I want to trade. For you, it’s the opposite, you want volatility low.
I’ve gotten someone from mql to create an EA base on Martingale hedging.
It looks promising with up to 50% drawdown for the year 2015 until recent weeks.
The drawdown is controlled because you set the lot size. My question. What is a reasonable drawdown for an EA. How to ensure the worst possible scenario for the EA to blow it’s account?
Ps I’ve created this EA purely to test a theory that martingale hedging works but comparable to its lot size. I hate to tell you this. But I’m profitable using martingale hedging. I’m losing alot using conventional trading with especially with stoploss.
Will post graph after I got home.
Trade what you’re successful at. If martingale strategies bring you success then trade those. This type of strategy is very risky in general, and risk tolerance is subjective, so you need to make that determination on your own. For me, I do not trade any EA with a historical drawdown over more than 20%. I try to get them below 15% typically. But my risk tolerance is low and my profits are slow and steady. So in general, a 50% historical drawdown might be tolerable if the profits are fast and high to make up for the higher risk. That’s just my opinion though.