SaadScalper EA - Questions - Thoughts

5000marios 2017-12-23 15:32:04 UTC #1

I am thinking of renting a VPS server and use SaadScalper for automated algorithmic trading with 350 USD initial deposit and a leverage of 1:500 to lower the margin used in order to avoid a margin call. What do you guys think?

(SaadScalper is a free scalper I downloaded and tested from the mql5 market)

Martin_K 2017-12-23 16:25:40 UTC #2

Hi mate
What do i think ?
Ok

I've never used Saad Scalper, I'll give it a test run on demo when i get some free time.
i like to keep informed with what's going on.... so i suppose, i'll let you know how it works out.

I'm not a fan of scalping personally.
i also have a trading system that is very profitable for me, (it's more long term though) but, i'll be honest, i do have the tendancy here and there to throw in a scalp on the odd occasion, but i really do it more based on

Instinct
Experience
charts and Indicators that i use

now.. RE

well.. you have not mentioned what instrument you are using.
you see, here's the thing (let's use my broker as an example) because a lot of brokers are different.

My broker, if you have an Account Leverage of 500:1
and you trade currency, then YOU DO INDEED GET 500:1 Leverage

but, if you trade indexes (Depending on the index) it will default to 100:1 or 200:1 depending which instrument you use
this will increase the margin. OF COURSE

now. if you are trading Crypto currency.. bitcoin for example, you will have a 5:1 leverage.
your Margin will be around $2000 - $3000

hence you'll get margin called a lot quicker

what do i think
i think $350 is too small of an amount to start with, that's my opinion from my experience over 7 years of trading and around 4 years of successful trading.

i say, test your scalper on demo first and see how that pans out before going live with it

AVOIDING MARGIN CALL is a matter of Risk management and Money management

You need to define where your stop losses are
You need to know HOW MUCH MARGIN you are putting in to begin with
and
MOST IMPORTANTLY, how much is left to trade with

Example
if you start an account with $350 and let's say you want to risk 1% so..... $3.50

here is what a newbie will do INCORRECTLY

they will conclude that $3.50 = 0.35 Lots and put a trade down for 0.35 = $3.50 per pip

now. with no consideration of where the stop loss is hehe.. they are basically firetrucked

but here's the kicker
if the instrument you are trading requires a $300 MARGIN and you started with $350
YOU ARE REALLY ONLY USING $50 to trade with
once the $50 is gone, YOU WILL GET MARGIN CALLED

now at $3.50 a pip, you can put your stop loss at NO MORE THAN 14 pips approx. from the entry.
now if you consider a pip spread of 3 pips,
it' s more like 11 pip stop loss
hehe

so... 11 pips and you get Margin called
See how quickly it eats into it

so , it's not really 1% is it ?

1% would be this....

if we assume starting balance of $350
if we assume Margin of $300
if we assume stop loss of 40 pips
if we assume pip spread of 3 pips

1% x 50 = 50cents
50cents divided by 40 pips + 3 pip spread = 43 pips = 1.16 cents

that would be a TRUE 1% Risk
but it's not even enough to open a trade of 0.01 Lots

and 1 cent per pip compared to the original $3.50 per pip that the newbie thought was 1% is ACTUALLY 350 x more
so its like risking 350% instead of 1%

Now, if you started with something like $1,000
it would work like this

1% x $700 (Accounting for $300 Margin) = $7 Risk
$7 / 43 pips (accounting for spread) = 16 cents per pip

therefore Lot size = 0.01
and stop loss is at 40 pips
Margin = $300

that's a 1% Risk where you would not get Margin Called

lastly, it is true that you can find instruments that will give you a Nominal Margin of around $20 or so
but again.. you didn't state the instrument

My overall thoughts are
TRY IT.. see how it goes
but i think you need more capital to begin with

5000marios 2017-12-23 16:46:15 UTC #3

Thank you for your reply!
The instruments I will be trading are EURUSD, USDCHF, GBPSUD, USDCAD. I have ran multiple tests through MT4 strategy tester to optimize the EA's settings. Using a 1:500 leverage means that for a volume of 0.01 lots, price at 1.3, I get a (used) margin of 2.6 per open position. I have come up with some settings, which limit the hours the EA trades, to avoid a big Draw Down and I tested the EA in a period when there should be a drawdown. With these settings the EA avoids times of high volatility so I don't get big DrawDowns.

Anyway, back to my calculations. I have noticed that my EA has usually 10-12 trades at max. Let's say it has 15 open positions, for one currency. If I use a margin of 2.6 per position, this means I will have used a margin of $39, for these 15 positions. In order for me to get a Margin Call, my balance has to dive to $39, which means $311 DrawDown. My tests show that the maximum DD I usually get is around $20, which is way smaller than the $311 required. So, with my calculations, I can trade 4 instruments at a time, which means approximately $150 margin used at max.

Are my calculations and assumptions correct? Forgive me if I am being silly, I am still a newbie and I'm trying to educate myself as much as I can before investing.

LaughingCharlie 2017-12-23 16:57:45 UTC #4

I completely see why it might look and sound attractive to someone whose experience of risk-management and position-sizing are minimal.

The reality is that this and/or any other Martingale-based EA WILL eventually blow your account, whatever size it is, and whatever leverage you use.

In my opinion, rather than investing the $350 in discovering whether or not I'm right, you should invest perhaps 20% of that amount in buying a couple of good books which will explain to you, in detail, why this would be such a dreadful approach (and a whole load of other important stuff, too). Because that's not just an experiment, it's an education. And with absolutely no disrespect at all, that's very clearly exactly what you need.

Do let me know if some book recommendations would help - and good luck to you, whatever you try.

5000marios 2017-12-23 17:02:28 UTC #5

Can you explain to me briefly why this system will not work? And how it has worked for tests I ran through strategy tester in MT4? (I am not saying this ironically, I sincerely would like to know)

LaughingCharlie 2017-12-23 17:13:09 UTC #6

Not in a way that will help you, unfortunately.

And that's part of my point.

A brief answer would be "It's Martingale-based and that means it's re-arranging the deckchairs on the Titanic" but I know that doesn't actually help you, and I'm sorry about that.

It's because this is so difficult to explain briefly in a forum that I'm suggesting that a couple of books specifically about risk-management and position-sizing would help.

The failure-rate in spot forex trading is very high, and is matched by the very high proportion of people trying it who have little-to-no real understanding of risk-management and position-sizing. It's because there are so many of them that these Martingale-based EA's acquire popularity with ever-changing short-term groups of beginning traders. You won't ever find anyone who makes their living through trading using anything like this at all.

I'm the "unhelpful one" perhaps, and I'm sorry about that. Martin (above) is perhaps more helpful. The other difference between us is that he replied (by his own admission) without knowing what SaadScalper is and how it works, but I didn't. Decide for yourself who to listen to.

Martin_K 2017-12-23 17:26:04 UTC #7

ok.. on the positive side of things, you are calculating draw down and other things which is good.
and limiting exposure time, which is good

now let's look at some math (if i have understood this correctly)

you have said

Meaning... you are saying if you have 15 Concurrent trades open
and the NOMINAL MARGIN for each is $2.60
you are saying that you will use no more margin than $39

now i have a few questions about this..

this statement conflicts with the first one

let's look at both scenario's
if you are using a MAX, NOMINAL MARGIN of $150, this is around 50% of your account if you are starting with $350 (i'm approximating. obviously)

Now. if it's $39 and you are starting with $350, you are risking approx 10% of your entire account.
but if you look at it correctly, it's actually a bit more than 10%
Meaning...... You can only lose 10times before you blow your account out

How does this make sense ?
You first said that 15 trades will cost you a MARGIN of $39
but... 4 Trades will cost you a Margin of $150
i don't get the calculation here

Now. clearly you said this

so.. you are basically basing your strategy around the concept that YOUR HABIT IS... that you don't lose more than $20
well. ASSUMING THAT IS CORRECT, You are fine

but.. hehe.. in my experience, you are going to experience a very very RUDE SHOCK

No. Not at all, it's totally fine

and AS A NEWBIE
how do you know that your experiments don't have flaws ?
because Flaws will cost you money

Also, why do you need to have so many concurrent trades running ?

and for this...

Exactly
and what makes you think that that will not happen.
again, you seem to be relying on this Draw Down figure of $20

Mate, HAVE A BACK UP PLAN
ask yourself,, WHAT IF ..... the Trading gods decide to throw a lighting bolt in Yo Ass hehe and you lose $300
WHAT WILL YOU DO THEN ?

Professional Traders (and.. i am not one of them) Plan for different scenario's.
Me personally, i trade profitably , and have been doing so for a few years,
a few things that tipped me from having little to no control or taking guesses to going to a point of control and the difference between guessing and CONSISTANT PROFIT was a few things

Understanding how Leverage works
Understanding how order flow works
Understanding NOMINAL MARGIN
Understanding MARGIN LEVEL %
Understanding that Risk is more than Just Risk to Reward Ratio and that it incorporates things like. Exposure time, Starting Capital , Lot Size, Nominated Risk per trade, Having a goal, Knowing when to stop trading for the day, Having a Stop loss and knowing where to put it, Having patience.
Testing and trusting my indicators and understanding what they are doing and how they are calculated
Calculating what will happen in all 3 possible scenario's, being...
What if the Market goes UP
what if the Market goes DOWN
what if the Market CONTINUES RANGING

but i think a biggie was
Understanding that 1% risk of your Account Balance vs 1% Risk of your Account Balance - Nominal Margin IS A COMPLETELY DIFFERENT THING

and Assessing all 3 possible scenario's,
you can never assume that you won't be wrong ,
My rule of thumb is GET INTO A SITUATION WHERE I CAN PUT MY STOP LOSS IN PROFIT , (Relative to my entry point) ASAP.
once the stop loss is in profit, I HAVE 0% RISK, Absolutely None.
this is what you want to get to.
anything other than this, IS A RISK and is therefore a possible loss or complete loss if you dont' have stop losses.

now.. if your tests are showing you you can pull this off... mate, all the best to you.
but, i think you'll blow out your account
based on Account balance = $350 vs you believe that risking $150 is ok............. IT'S NOT

and even based on the fact that you are ok with risking 10% of your account Balance
and that you believe you won't suffer a loss of more than $20

Just to do some quick math
if you are trading 0.01 Lots, aka 10cents per pip
Now if you are trading EURUSD (and i know how that moves at times)
for you to suffer a loss of $1 (let's ignore spread for now) EURUSD would need to move 10 pips
THAT'S EASY for EURUSD

it's not uncommon to move 50 Pips which would be $5
now.. you multiply that by 15 concurrent trades going in the wrong direction and you have a loss of $75
add to this your margin (Assume $39)
you are now over $100 in the hole
THIS IS 1/3 OF YOUR TOTAL ACCOUNT

Meaning.. if you stuff up like this ONLY 3 TIMES.... Your account is gone.

You do not want to be in this position... Trust me

now that's if EURUSD was to move 50 pips, which is very common

what if it moved 150 pips, which is very do-able, or even 100 pips or 90 pips. very Do-able.

Mate, you'll be margin called and likely at 40% margin level or lower

now the answer is this

"Martin i would have stop losses in place"
and my response would be

"Ok mate, how far away are the stops from the Entry Points" so we can calculate them

now THIS IS WHAT I WOULD EXPECT OF YOU

i don't care if you have 100 concurrent trades, BUT....
the total amount you are risking in Stop losses MUST NOT EXCEED 3% of your Account Balance - Nominal Margin
1% or less would be better

so if you account for your Account balance, then deduct the total NOMINAL MARGINS you will use,
the figure that remains MUST NOT EXCEED 3%

to do some rough calculations
if you have $350 account balance
and your Nominal Margin for all 15 trades is $50 for example
you have $300 to trade with
now 1% of that would be $3 or $9 if you are assuming 3%

now if you want to have 15 concurrent trades you need to divide that $3 or $9 by 15
which leaves you with 20 cents or 60 cents respectively PER TRADE

you then need to calculate your stop loss
so if you have 0 pips stop loss, your Lot size would be 0.02 or 0.06 respectively

but if you had a 10 pip stop loss , well then you are trading at 2 cents per pip or 6 cents per pip
BUT YOU CAN'T DO THAT.. can you ?

so your other solution is
REDUCE THE AMOUNT OF CONCURRENT TRADES and that way you can increase the lot size per trade
but the TOTAL RISK for all the trades must never exceed whatever risk you are willing to take.

i think you are putting too much trust in this $20 DD thing

i say, TO PROVE IT
test it on demo and try and prove me wrong
then do it my way and see what happens and form some sort of system based on the results of those tests.

5000marios 2017-12-23 17:59:43 UTC #8

The $150 DD was deduced as follows:
$39 for 15 trades for EURUSD
-> 4*39 = $156 for EURUSD, GBPUSD,USDCAD,USDCHF (60 trades open).
In order to have more safety I decided not to trade USDCAD, it was the less favorable by my tests, so I remain with 45 trades open (at a usual maximum).

So, with 45 trades open, I have let's say $115 used margin. This leaves me with $255 DD margin.
You said that for EURUSD a 100 pip change is common, which is $10. In order to have a margin call my 45 positions would have to drop to a profit of -$5.67, or otherwise around 56-57 pips drop. Yes I don't think that's impossible, BUT, my EA opens a new trade (using the Martingale system) after the previous losing trade has lost another 15 pips. This means that if I have opened a SELL position at a point where I get an up trend and we have 100 pip change at the top, the pip change would be:
Trade 1: 100 ($10)
Trade 2: 85 ($8.5)
Trade 3: 70 ($7)
Trade 4: 55 ($5.5)
Trade 5: 40 ($4)
Trade 6: 25 ($2.5)
Trade 7: 10 ($1)

Total for 7 trades: $38.5 drop.

The 15 trades open was a bit exaggerated. Maybe 10 trades for each currency pair is more normal. So let's say around $60 drop for this currency pair. For 3 pairs, $180 drop. I am still above the Margin Call level, and this calculated situation is for a sudden up (or down) trend of 100 pips.

I am not trying to convince you of something, I am just showing you my calculations so you can share your thoughts on them

Falstaff 2017-12-23 18:21:59 UTC #9

Interesting concept, which could do well as long as you were in a range of the right size.

How does your system know when your trade has failed and you need to bale out ?

5000marios 2017-12-23 18:25:20 UTC #10

I am not the coder of this EA so I really cannot answer to you! If you would like to get informed about this EA visit its product page
[EDIT: Removed the link of the EA because someone thought that I was advertising it... ]

Falstaff 2017-12-23 18:30:47 UTC #11

Absolutely 100% NO !

You joined 3 hours ago and have all the details about pyramiding IN - but seemingly know nothing about when your trade goes wrong despite significant "Backtesting"

Martin_K may want to waste his time with you - I believe you're just "pushing a system"

5000marios 2017-12-23 18:33:16 UTC #12

What do you mean I am "pushing a system" ? Does that imply that I am trying to advertise this EA in this forum?

LukasVisser 2017-12-23 18:55:48 UTC #13

They won't listen, mate. They don't want to know that.

You're wasting your time, here.

They want get-rich-quick, easy automation, and the results of successful trading without the process that leads to it. They don't want logic, or reason, and especially not education.

Merry Christmas, Charles.

Martin_K 2017-12-23 19:49:57 UTC #14

re this
I am not trying to convince you of something, I am just showing you my calculations so you can share your thoughts on them

No, that's fine, I understand

Mate, Look
TEST IT.. if it works.. Great, go with it.
if it doesn't work, Learn from it and figure out where you went wrong.

Also what you need to understand about martingale system is.
IT WORKS (ON THE CONDITION) that you have an Unlimited budget (Literally Unlimited)
because it works on the concept that YOU CAN'T ALWAYS LOSE
Just like you can't always win

so be careful of Martingale, a lot of people rely on it, but don't really understand how it works and the pitfalls
just the way exponential growth works,
when you are losing, Martingale is EXPONENTIAL DECLINE or EXPONENTIAL LOSS

think about it
be cool
Merry Xmas

5000marios 2017-12-23 19:53:15 UTC #15

Understood! Many thanks for the time you spent trying to help me! I hope you have some wonderful holidays, Merry Christmas!

_bob 2017-12-23 20:05:33 UTC #16

You lot need to do your homework. Bad bad robot

5000marios 2017-12-23 20:19:37 UTC #17

The thing is, this EA can wipe your account if you don't insert the correct settings.. This chart means absolutely nothing without knowing the settings used. The creator of the chart could have used a SL at 1 pip, yeah that would destroy your balance.
(Same applies for Equity)

_bob 2017-12-23 20:23:47 UTC #18

well, you're the developer then pushing. Don't like pushers

Either that or just plain stupid. In which case sell your house and go for it!

Flagged again lol. System is ducked

5000marios 2017-12-23 20:27:50 UTC #19

I am not pushing, you guys should chill a bit. I don't give a damn if you want to download it or not. I am just trying to make an argument. Obviously, you are not capable of this. Have a nice day sir

_bob 2017-12-23 20:33:32 UTC #20

Not the case at all. Just have no time for lazy stupid people that think downloading a EA and running it on metatrader will solve their financial problems. And then pushing it onto others.

Chilled and keeping it real. Go have a beer dude, enjoy the fact its Christmas.