I think some people are missing the main point of this thread. I am not saying the EA I am running is the success here (though it has been rock solid). I don’t think it matters which EA you run as long as it is consistent and as long as it opens and closes trades as it should. My point was that for the longest time I have been looking at the system (the EA or strategy) mainly. It occurred to me back in August that I was looking at Forex trading from the wrong perspective. What I think I discovered was that the focus should be on the lot sizes in relation to the account size (in order to cover open positions and the possibility of new positions opening)…covering the draw down. In relation to that, I looked at TP targets. The question I asked was: "Why am I looking for the silver bullet in the EA or trading strategy for the big wins and risking big losses at the same time if I can string a lot of small wins together and do it such a way that A) TPs are hit quickly, often and B) how can I do this without major stop losses. If I only need 4-5 pips for a TP and I should be able to get that easily due to market “noise” on smaller time frames, then why not run an EA on pairs on a 5 minute chart and run a simple but effective EA?
AS LONG AS I HAVE MARGIN to cover any open positions then the account will continue to grow. As the account grows, I up my lot sizes so the risk to reward ratio stays about the same while I let the account grow organically. At some point (and I don’t know what that number is yet), I’ll stop upping my lot sizes, my draw down will remain about the same, but the profit it makes will be something I can take out weekly, monthly, whatever…and the EA will continue to churn. At some point this thing will be making enough to cover what I make at work each month and then I will probably need to think whether or not I want to grow it more for cushion or start withdrawing that monthly profit. Either way, it is growing each month. Last month it made $2758, the month before it made $970-something. I upped lot sizes after last month and the profit grew. I just upped my lots sizes again over the April 1 weekend. My target profit for this month is $4k. We’ll see how it goes. If I don’t make it to $4k and I only churn 7% and get $3500…shoot, darn! (end sarcasm).
Also, if anyone is interested. I just started a new live account running the same “system” exclusively on the 1M time frame. Started April 1. I’m already up 3.58%.
So you trade fix lots (although I see an aggressive martingale is employed after a loss) no SL, no TP and close trades which are just in profit. Why would we be interested in this?
Probably more later than sooner, but one thing can be certain, the market will get it’s revenge. She’s a *icth after all!
Nice to see another genuine myfxbook link. Its a great tool to use, tons of info produced that can help you out. Just a shame the scammers manipulate it and dont seem to get their accounts shut down
Yes, a Martingale is applied. In most cases it works out and the account keeps churning. When it doesn’t… it never takes a loss…so how this will kill my account is beyond me. Again, if my lot sizes are small enough so that I have enough margin to cover those that go the opposite way… then what is going to crash they account? If, down the road, I decide to take the hit and close some of the open positions…they will be pretty small since THE ACCOUNT KEEPS GROWING. Case in point: I have a double trade (regular and Martingale) open from September on GBP/AUD. It was a small lot size compared to what I am trading now. I have the option to close it and take a relatively small hit and keep on cruising or I can just let it ride. It matters not. The account keeps growing with or without that pair. I never take a loss…because if I do, there is a Martingale there to trump it. Here are the possible scenarios in this set up:
a trade opens (first lot size trade). It moves 5-6 pips and takes profit. Win.
a trade opens, goes the wrong way, a martingale triple opens, it moves 2-3 pips and takes profit (see averaging closer to the TP). Win - even if the first lot size is negative, the Martingale takes profit which is set to my original TP target anyway.
a trade opens and goes the wrong way, a Martingale then opens and it continues to go the wrong way. It stays open. Draw - only my draw down is influenced. Not a big deal if I have plenty of margin to play with since my lot sizes are set according to my account size and number of pairs I am running.
One could say “well what if all of your pairs get locked up in open trades?”… sure it *could happen. Not likely…but even if it does, my account has been growing constantly. I could take the hit on a handful of pairs to free them up to start making more trades. I’m still way in the positive at that point.
BTW, I don’t close trades, the EA does that. I just wake up in the morning and see 10-15 trades that fired off and took profit while I was sleeping. I don’t have to watch it at all. Margin? Check. Bots running? Check. Profit being made? Check. Lot sizes and TPs set according to account size? Check.
I sleep at night
Point is, if you look at my myfxbook and look at the risk of ruin for this account…you’ll see that I would need a few thousand in SLs or negative trades for this to fail. I never have losses. ever. Martingale’s ensure that is the case.
Thanks Eddie!
3.8% since April 1 running 8 pairs. Once it gets up to $2K I’ll start running 12-14 pairs. At $4k I up my lot sizes to .02 and .06 with a double TP. Myfxbook is great because it tells you so much info (that which I was trying to capture manually prior to using it). My main account on myfxbook isn’t updating the last month numbers in the top info box…but I had something like 450 trades last month. If I can do that again with higher TP targets…more money coming in!
Your fxBook account does show very good returns. Being a total newbie, I have the following confusions. First why does most of your open trade shows heavy loss while your closed trades shows profit most of the time? Also, I am curious why your equity is below your deposit and your account still shows a 80% profit? That sounds contradictory to me. I think someone earlier has hit this point before but I am not total convinced that his interpretation was correct. Last but not least, what is the name of the EA you are using (if you could provide a link, I would be in deep appreciation), and do they provide any backtesting and forward testing result? A system that uses no stoploss sounds extremely risky to me and I don’t think anyone should risk capital that way.
Myfxbook uses an average of your total deposits throughout the history of your account. So the 85% represents the amount I have gained over the average of my account balance…meaning, I put in 1K to start and ran that for a month, dropped more money in after that and so on…so the average of how much time I was working with only 1K versus the time I have had more money in…the total profit is compared to that average rather than the full amount. The number just below that will show you the total made based on the entire sum. Mouse over “Gain” and “Abs Gain” and it will give you a proper definition (Tme-weighted return vs. Absolute gain).
Open trades show heavy loss (not really loss, just negative open trade - it is only a loss if you take it) because they go the wrong way. If they went the right way, they took profit. The only “loss” is when a position (usually the first position that opens) closes for a loss…however that really isn’t a loss because my Martingale trade takes a profit above that loss for my original target TP. Equity is below my deposit currently because I just up’d my lot sizes. So, if a new position opens now it is a much larger position size and eats more margin than an older trade. As the new positions start to take profit, my account will grow that much quicker and thus eventually my equity will be greater than my deposit and open positions…until I get to the next level where I up my lot size and TPs again and then it goes below again. The key here is it catches up and when I finally reach a point where I want to start taking money out each month, I’ll just not up my lot sizes.
I am using an EA I bought. I can’t link here on babypips but if you want details IM me. I’m running two. One looks for divergence. The second one is strictly an RSI based on. It hits a certain low or high and takes the opposite direction. The RSI one has been flying for me on certain pairs. It is so simple yet so effective.
Again, in a regular system, I would agree that not using SL is suicide. However, I have taken into account the fact that if all pairs opened double positions, looking at my account size, I know what I can set my lot sizes to in order to weather that storm if they all went south. That is the key and premise to this entire thread: smaller lot sizes with a ratio set in accordance with you account size…so the margin is always there if needed. Is it risky? Yes and no. Yes because trading forex is risky in general. No because I have plenty of margin to cover it in a worse case scenario. 30% draw down doesn’t scare me at all…because I know that I have room if a ton of stuff opens.
I must say that your answer is very clear. It does reduce my doubts about your system.
I think any serious fx trader would have read the article on investopedia about martingale systems ( or other articles like that). To trade a successful martingale one needs to have deep pockets, which you seem to have solved by using small lot sizes. However, being an stiff academic, I am still not totally convinced.
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Let us do a thought experiment. Say you allocate 1% in your initial entry. You lose and double to 2%. It would only take 6 losses for you to risk 64% of your account, which is quite substantial ( and the sum of losses would add up to more than your account total!). So I am curious how you keep the draw down to about 30% only?
So, an example. Let’s say I am running a $2k account. My lot sizes are .01 for the opening position and .03 for the martingale. If, in your example and for the sake of simplicity, 6 pairs open a 1% position, my account is now hit with a 6% draw down. Then, as bad fate would have it, they all opened up Martingale positions (another 6 positions of 3%). Your total is now 24% drawn down. This a worst case scenario. I now have 6 pairs that have gone completely the wrong way with 4% draw down for each position. That stinks but is tolerable…but…meanwhile, other pairs are churning and my account balance is going up. Now that 4% is based on a smaller account size than it is now. Let’s say those 6 pairs hold on resist the will I am mentally give them to come back…but my account is now up to the next level where I am ready to up my lot sizes and TP targets. Now my lots are .02 and .06 and slowly but surely that original 1% and 3% positions that are “locked up” aren’t taking up that much margin anymore. Take a gander at my myfxbook link for the larger/older account. I have something like 18 positions open (24 individual trades or so). Even with all of those open my current draw down is something like 16%. I have trades that have been open since September and October. I just had two close that were open since November a few days ago.
The thing that really kills my margin are the new lot sizes relative to the account size…the “I graduated to the next level” move. When you get to the next level where lot sizes are ready to go up, you are at the bottom of that “tier”. Draw down goes up at that time because you are now drawing against the account more…until trades accumulate and the account grows within that tier. The older open trades that never cane back (yet) really don’t pull on your margin as much as you think.
So for instance…let’s take the old GBP/AUD position and martingale position that opened in September. At the time those were a .01 and .03 lot sizes on a $2K account. Margin was hit normally but it was still fine as I was within my account size lot size tier. The account grew, and grew, and grew. Now that .01 and .03 lot size doesn’t pull much at all on my account because the account is so much bigger. In fact, as I stated before in a previous post, I can either let it ride or I can close it, take a small hit, reset, and let that pair start eating at a higher lot size and TP like the rest of its peers. Is it currently eating up some of my margin? Yep. Is it significant? Nope, not at all. It represents about $250 or so (not looking at it right now) in negative balance. For comparison, I made $220 or so just this morning on my “churning pairs”. So, yeah at some point I may look at killing an old pair or two to free them up to trade another day. But, letting them ride as they are doesn’t really kill much margin.
The highest my draw down has ever been since September is 29 something. That was a mix of the market shifting and me moving lot sizes up because I was at the next level. In the beginning I started with .01 and .03 on $2K, at 4K I double those. At $8K I double them once again, etc. The risk/reward ration stays relatively the same. At that ratio I figured out that the number of pairs that I could trade without a margin meltdown was between 14-18 pairs. At one point I was running 22 pairs and, I admit, there were some times where I felt uncomfortable (see: white knuckling it). Each person has their own personal pain threshold. I play more conservatively than others who are running this “system”. at 30% draw down I am not the happiest of campers…but again, even with all of the pairs I run, coupled with the lot sizes based on account size, I have only hit 30% draw down once.
Sorry for the long-winded response. I don’t want people to feel like I am trying to sell them on this. I’m just suggesting to people that maybe they should shift their focus from looking for the perfect EA or system…and look at risk reduction and capital management in relation to their account balance and the lot sizes they run.
Thanks for your reply. Your answers were so detailed that you almost come across like a sales rep (jk of course… :)). Your answers were very clear and I now understand more how your Martingale operates - it is a bit different than what I imagined originally.
I digged through your old answers in this thread. It seems like your bot operates in the following fashion:
open a system with small lot size based on RSI.
if the pair hits the TP, close and take profit.
if not, once RSI is hit again, counter with 3 units of original lot size.
wait until TP is hit based on the combo (or close out with a loss).
Step 3) is a Martingale. It is slightly different from a Martingale in the most conventional sense, which is to keep doubling your lot size until you hit the TP. So here is my confusion: what if the 3 units of lot size loses? Do you open again with 9 units of the same pair?
I know I sound like your grandma with these questions. But like any good trader, I am not willing to risk my capital before I understand the system fully.
Great questions! …and no worries on asking so many questions. Information is king and you should definitely look at all possible outcomes in a system before risking any real capital. This is why I demo’d this for a couple of months at various account levels to test it.
Answers:
open a system with small lot size based on RSI. – Yep!
if the pair hits the TP, close and take profit. – Yep, automatically!
if not, once RSI is hit again, counter with 3 units of original lot size. – Yep!
wait until TP is hit based on the combo (or close out with a loss). – Yep, though I don’t close anything manually. I keep it open and let it ride until the martingale trumps it for a take profit.
Step 3) is a Martingale. It is slightly different from a Martingale in the most conventional sense, which is to keep doubling your lot size until you hit the TP. So here is my confusion: what if the 3 units of lot size loses? Do you open again with 9 units of the same pair?
The EA is coded to only open one martingale. It doesn’t keep opening new martingales…only the one. If the RSI hits that level again the EA does nothing. It only allows for 2 positions, the first single lot size and then the second being the triple sized martingale. No other trades will be opened unless I open one manually…which I don’t. (Well, I tried one on USD/CAD and it is still open). I won’t do it again. Taking the human condition out of the EA is key I have learned. Don’t muck with it, just let it do it’s thing.
I have a spreadsheet with the lot sizes and take profit levels based on account size. I can share it with you and everyone else if there is interest. Basically I used $2K with a lot size of .01 and .03 with a TP target of $1.25 on start. When the account size doubles, so do the lots and TP targets. Doubles again, so do the lots and TPs. So, in theory, if you were playing with $40K, your lot sizes would be .16 and .48 with a TP set to $20 per trade. Averaging 50 trades per week that’d be $1K per week give or take. I’m currently running .16 and .48 lots. As the account grows, so do the lots and TPs. Example, if your account is at $160k, your lots are going to be .64 and 1.92 with TP target of $80 per trade ($4K per week). Bigger numbers, yes, but the same risk ratio applies as if it was a $2k account
Have more questions? I’m more than happy to answer them as best I can! The other thing I want to say is I didn’t invent this trading angle or perspective. As I said in one of my first thread posts here, I listened to a podcast and took note that the person speaking was focused on many small trades, in and out quickly, rather than the silver bullet of a huge winner. I basically followed his vision, changed up the lot sizes and TPs a bit to play more conservatively. I can’t link to the podcast or to the trader here on babypips (see babypips posting restrictions) but I’d definitely like to tip my hat to him (which I have done personally through email).
Was there any consideration given to using a large trailing SL? One that would only be hit in the event of a flash-crash or other similar event / catastrophe.
Also, you say that when the account has grown to a certain size that you will make weekly/monthly withdrawls for income. But it seems to me that this system will only work if the account continually grows, as any losing trades which are made at the current tier can only be tolerated due to the ever-increasing account size. If the balance stagnates due to withdrawls, there will still be new losing trades accumulating, which will eventually become too many. No ?
One could use a Stop loss I guess but for me, a loss is only a loss if you take it. Why take it if you don’t need to? If you are more comfortable using one then that could work too. You would, in fact, make more than you would lose. I am fine with letting the old trades ride. They will eventually come back or I will close them for a small loss.
Withdrawing funds: Again, I don’t take losses. For every losing trade there is a martingale that trumps it which keeps the account growing. Granted I could have a slew of open positions at one time (which I do). But they either keep coming back while other positions continue to open and close, or they stay open and the other pairs continue to churn. As I move lot sizes and take profits up (when I get to the next level) my profits also rise in scope. The account grows quicker. Let’s say I have made it to 100K and I am ready to start withdrawing money. at 9% average growth, that would be 9K. So, I let the account continue to make that amount but when it is time to move lot sizes yet again, I don’t. My open positions will continue to be about the same as my lot sizes are now capped. My account will continue to keep growing at the same rate. So I should be able to pull that money out after a month or so when the money in there continues to grow each month but my open positions stay about the same. Instead of growing the account to the next level, I just pull that money out.
The only way this “stalls” is if all of my positions get locked up. Not likely…but even if they do, I start closing a handful that have been open for a long while that aren’t large in size and, voila, I have more trades working for me again.
I did not build this bot (or rather the two I use) I bought them. There are free online and downloadable software packages that will help you build one if you are looking to do that. I have a theory that I may test soon which is this would work on any EA/bot as long as that bot fires off trades regulary. I was considering taking a standard EA that comes pre-packaged with MT4 and use that with the lot size/account size ratio and take profit targets on a 5M chart and see if, in fact, ANY EA would work. I’ll let you know if I do and I’ll share the myfxbook chart as well
Been down that river…the real one too. It’s just a theory…but I’m willing to toss real money at it to see if it works. Then again, I’m not sure what your comment is aiming towards. I’m not sure what I am in denial about. If this set up isn’t for you, that’s cool. I wish you luck in whatever forex strategy you are working. We’re all trying to succeed in trading. I’ve tried a lot. This one seems to be working for me. Skepticism is a good thing when it comes to your hard earned money. Again, I’m not trying to sell you something here…just saying that I think I was focusing on the wrong aspect of trading before.
I am playing the role of a skeptic bro. But I do wish you success. You’ve been in this gig longer than me. And the fact that you have survived is testament enough.
A good skeptic is needed for all forex strategies and systems. Gotta kick the tires and make sure all bases are covered (as well as they can be in this crazy market). I welcome skepticism because it may reveal or open my eyes to something that I missed!
