Recently we have been witnessing a substantial revival of martingale-based (What is Martingale?), grid-based and averaging Forex Expert Advisors and other trading robots, which I would personally call hazardous. Why do I regard them as hazardous? Can anyone earn consistent profits in the Forex market on these Expert Advisors? In this article I’m going to reveal you 9 top secrets of trading by martingale-based and other similar Expert Advisors.
Firstly, let’s find out, what is the hazard of martingale-based, grid-based Expert Advisors and other trading robots that wait for positions to be in profit. The idea behind all of these robots is that the price generally comes back to some average values. Based on this idea, the following features are added in strategies of these Expert Advisors: opening of additional orders upon hitting a certain loss level of an unclosed losing position, lot increase in case of loss, pyramiding of orders, etc. However, the market does by no means always come back to the prior prices. If you trade based on casino strategies, you can easily and in a flash lose the entire or the most part of your deposit.
However, higher risk means higher profitability: as a rule, the martingale-based Expert Advisors earn profit, which is several times higher than that made by other Expert Advisors. It is the same as with “MMM” (Russian-based Ponzi scheme company) – this pyramid scheme will yield a fair amount of profit, until it collapses. Nevertheless, one can profit from hazardous Expert Advisors on a rather regular basis, if he or she follows certain rules, which we discuss below.
The most serious mistake made by inexperienced traders is that they trade on micro or classic accounts. Martingale-based Expert Advisors, Expert Advisors that wait for positions to be in profit, etc., must be launched on a cent account only, since they require to have a large sum of money on your balance account to start trading in 99% of cases: the fact is that they open a lot of orders plus additional orders having an increased lot (it depends on a particular trading robot).
The minimum amount of money necessary to trade by the Expert Advisor on a cent account is no more than $100. We recommend you open Alpari Micro accounts
One fool told somebody that the higher is leverage, the higher is a risk. Since then some traders believe that their trading risk decreases, if they select the minimum leverage. It’s nonsense. The risk depends on a position size and a stop-loss level.
So, when trading by martingale-based, grid-based and other Expert Advisors, we need a high leverage as people need air. 1:500 is the best possible leverage. Why? A great deal of open losing orders can result in a margin call and then in a stop-out. Of course, it is in our interests for the moment to happen as late as possible, so that losing orders get a chance to turn into profitable orders. That’s why we put our pyramid of orders at a risk and can lose the most part of our deposit, if we don’t select a high leverage.
In most cases guidelines for the minimum deposit, lot size, recommended currency pairs, etc., are included in packages of questionable Expert Advisors. The majority of traders don’t care about it: they just scroll a text down to “Download” button and close a web-page.
Don’t be fools!!! Guidelines are given, since their developers already have an experience of trading with one or another trading robot, worked out successful trading strategies, found out what currency pairs are worth and not worth of trading with. Why to repeat other people’s mistakes?
If an Expert Advisor requires $300 as minimum to start trading, it means that it doesn’t make sense to run it on $10 deposit. The similar things happen nearly always: I don’t know, whether people are lazy to read these guidelines, or they think they are the smartest people in the world. I repeat once again: don’t be fools and follow the guidelines.
Other people’s experience is certainly a good thing, but you should also test it all by yourself and adjust an Expert Advisor to your particular trading style, namely: before you activate an Expert Advisor on a real account, you need to test it in MT4 Strategy Tester. At that you should specify that amount of deposit and those settings, which you are going to trade with on a real account. You must know, what drawdown to expect, is your deposit amount necessary (perhaps, it is worth to increase it), etc.
Whatever superior results you obtain in the Strategy Tester, and whatever “ingenious” settings you sort out, a hazardous Expert Advisor will sooner or later lose the entire or the most part of your deposit. Believe me: it will certainly happen tomorrow, in a year or at another time. You don’t need to be afraid of it or hope that it will happen not now, but some day. You should take this factor into account and make allowances for the “MMM” company to collapse on any day.
That’s why you need to make a rule of the following thing: you should regularly withdraw earned profits once a month or a week. Ideally, your goal is to withdraw your initially deposited funds and keep on playing with “casino money”.
Do not hurry to run a trading robot on a real account, since the Forex market doesn’t escape you. You must explore the Expert Advisor you are going to trade with: learn how it opens positions, how long it maintains these opened positions, what are its strengths and weaknesses. It is not enough just to test an Expert Advisor in the Strategy Tester: launch an Expert Advisor on a demo account and monitor it for one or two months. It can help you save heaps of your money later, when you start trading on a real account.
If you explore an Expert Advisor (see item 6) and notice that it often holds open positions for a few days or even months (there are such trading robots), then you would better select a swap-free account. It can help you avoid additional losses in the form of swaps (a fee charged for rolling over a position for the next trading day).
Imagine that an Expert Advisor has started pyramiding of orders, and electricity is shut down for a couple of hours at the time or your Internet provider has decided to carry out off-schedule repairs and turned off the Internet. Is it a force majeure? That’s it. You can not only miss your profit, but lose your deposit due to this troublesome accident. The fact is that an Expert Advisor will close orders, if the Internet and electricity are off.
You can avoid such unfortunate situations, if you employ a VPS server for trading by Expert Advisors. (Comparison table of Forex VPS providers >>)
The lower is a spread, the better. You’ll agree that you feel very and very offended, if pyramiding orders don’t close for one simple reason that the price is missed by 1 point to trigger a take-profit and then these orders go into the red. It would be better to pay an additional fee for opening an order so that you can trade with lower spreads.
Of course, every particular Expert Advisor has its own nuances. However, compliance with the above-mentioned set of rules can help you earn consistent (as far as it is possible) profits trading by “hazardous” Expert Advisors and make them more safe. See here Advanced search filter of Forex robots >>