Why Are Those EAs So Dangerous?
Martingale trading robots (and similar programs) work on the principle that the price always returns to the average value. That is why such Advisors involve some rather reckless actions:
- Building pyramids from several orders
- Opening new orders when the price reaches a specific uncovered loss
- Increase position size after a loss, etc.
Of course, the market is cyclical but it doesn’t always return to average prices. That’s why aggressive Advisors might lead to a loss of entire capital in just a few trades.
You might wonder why would anyone use such robots. Martingale Advisors, if successful, bring high profits that are a few times higher than income from any conservative strategy.
How to reduce risks from trading with such Advisors while maintaining the level of profitability? To do this, you must follow several important rules:
- Use cent accounts
- Trade with maximum leverage
- Follow all Advisor rules
- Check EA in tester and on demo account
- Timely withdraw profit
- Choose Swap-Free Accounts
- Use floating spread
- Trade on VPS server
Use Cent Accounts
Most aggressive Advisors, including martingale, imply a huge balance. This is because trading robots open a high number of orders and increase the position size and that requires a significant margin.
Some Advisors may imply a minimum balance of $10,000 in order to function normally. Not every trader can afford that and definitely doesn’t want to risk it. When trading on a cent account, you can use the Advisor having only $100 on your account.
Trade with Maximum Leverage
This rule is also due to a large number of open orders. If any of them are at a loss, this may lead to Margin Call and the closure of positions by Stop Out. To avoid this, you will need large leverage of at least 1:500.
Follow All Advisor Rules
Most Advisors come with recommendations:
- Minimum deposit
- Optimal currency pairs
- Position size, etc.
All these tips are made by traders who have already used this robot and know exactly what works for it. Believe me, it makes no sense to use a program that is advised to have a minimum of $500 on your account when you only have $50. Don’t try to be smarter than other experienced traders. Make sure to carefully read and use all the recommendations.
Check EA in Tester and on Demo Account
The recommendations of other traders are not a panacea. Make sure to test the Advisor before risking your own funds. Start with a tester in MetaTrader 4. It is important to indicate the settings that you plan to use in trading, including the number of your funds, position size, etc. This will help you evaluate your chance of success on a live trading account and assess whether your deposit is enough.
Then proceed to demo trading. If you want to really study the Advisor you will have to spend at least a month there. Pay attention to how the program works:
- Its weaknesses and strengths
- How the program opens and closes positions
- How long it holds the positions, etc.
Timely Withdraw Profit
The high risk of such Expert Advisors means that eventually you are guaranteed to lose the bigger part or entire deposit. Your goal is to withdraw at least the initial amount and worry less about further losses. To protect your income, it is worth withdrawing profits once a week or at least once a month.
Choose Swap-Free Accounts
This point applies only to those Advisors that transfer open positions the next day. At least you can save on possible swaps.
Use Floating Spread
Let me remind you that Martingale Advisors open a large number of orders. That is why you need to use the minimum available spread, preferably floating. If you are afraid of sharp expansion, avoid trading during major news releases, etc.
Trade on VPS Server
VPS-server is the only way to save dozens of positions that your Expert Advisor opened when your Internet or electric power suddenly shuts down. Believe me, such a measure will pay off.
Obviously, each individual Advisor and individual trader have their own nuances. However, the rules above will for sure help you minimize the risks of trading with your aggressive Advisor while maintaining its profitability.