Fund protection using Free Margin Level
percentage analysis is a very important part of money management when trading
with multiple open trades. It is something you can also do even if you trade
manually.
A bot with a Free Margin Level percentage
parameter that gives user an option to stop opening more trades when a certain
low percentage is reached is a very powerful tool that a bot can have. It gives
the fund enough buffers to breathe during the trade. This is important on bots
that have hidden Stop Loss or bots with no-SL.
There are three (3) values that you need to
keep in mind when setting Free Margin Level percentage.
- 10,000%
- this is a conservative percentage. If you use this value the bot must
not open more trades when the Free Margin Level percentage reaches 10,000%
or below.
- 5,000% - this is a moderately aggressive
setting. When this value is used, the bot must not open trades when 5,000%
or below is reached.
- 2,000%
- this is an aggressive setting. When this value is used, the bot must not
open trades when 2,000% or below is reached.
Feature
#2: Maximum Number of Trades
This feature makes sure that the bot will not
open new trade when a certain number of open trades are already running even if
Free Margin level percentage is not yet reached. This is to preserve the fund
buffer and to make sure that it will not be depleted too fast.
Feature
#3: Maximum Running Negative
Amount per Pair
This feature looks like similar to feature #1
but they are actually two different techniques on preventing big drawdown.
Feature #1 is a prevention of opening new trade if a certain Free Margin level
is reached while feature #2 is a prevention of opening new trade when a certain
total negative profit of a currency pair is reached even if the Free Margin
level in feature #1 is not yet reached and/or the maximum number of open trades
is not yet reached. We need to have this to make sure that the bot will no
longer open a new trade when the price is reversing too fast with the current
open trades.
Feature
#4: Target Amount To Force Close
And Stop Opening Trades.
This feature is one of the best discoveries
that I’ve got and I’m sharing it here with you. Greed can always lead us to
disaster. This feature is a very simple one but can save us a lot by helping us
control our greed. A bot, scalper or not, should have an input parameter that
will make the bot stops whenever a certain Target Amount is reached. For
example, if your fund is $2,000, set a target profit of 10% or less for each
run of the bot; so in my sample fund of $2k, that’s $200. Adding up, that makes
$2,200 as my Target Amount.
So what is this Target Amount. When you run the
bot and it starts earning, then it reaches the Target Amount, the bot will stop
and no longer open a trade. Even if the
bots backtest performance is very good in a 10-year of data, always keep
in mind that the market is random and may not perform as good as the last 10
years. So to save yourself from a future unknown disaster, practice to stop
your bot whenever a certain profit is reached.
There are 3 reasons why we have to do this:
1. To give time for the bot to breathe – putting the bot to break gives
you a bigger chance to prevent the possible disaster as the bot stops from time
to time. Although the bot has a specific set of trading analysis rules to
follow making it to stop will make the analysis looks like random. This can
also trick a few brokers who manipulate the price-movement feed to “SCOOP” some
in-house profit. We don’t know who these brokers are so we need a mechanism to
minimize or prevent this manipulation.
2. To give you time for your manual analysis – the
bot, no matter how good it is, should be checked from time to time to make sure
that it performs well according to your own analysis. How to check? By using your own personal
favourite strategy, try to know the general direction of the market. If, for
example, the bot’s last trade was a “Buy Long” and your analysis of the general
price direction is bullish, there is an alignment with the bot’s last analysis
and your own personal manual analysis. If they are aligned, run the bot again
right away. If they are not aligned, do not run it yet. Run it the next day, or
if there’s so much red-flag news for the current week, postpone the running for
the next week.
3. To give you time to withdraw some profit – it is a good habit to withdraw
when there are no open trades. If you are running a bot, it is not a good idea
to withdraw some money when there are open trades. This will surely affect the
money management calculation of the bot and may lead you to disaster.
Feature
#5: Profit Protection
This is a very important feature that really
makes a bot special. Each bot developer has designed their own version of
Profit Protection feature. There’s really no exact description to define this
as it all depends on the trading strategy that the developer used. All
developers are not really that willing to disclose their methods and scripts on
this as it is one of the features that make their bots special. They don’t want
competitors to copy it, of course.
As a general way to protect a profit, MT4 has a
Trailing Stop feature that every trader can use on both manual and automated
trading.
If you are trying to develop your own bot’s
Profit Protection feature, you just have to be creative in finding the best
tactic for your strategy. You can customize your own trailing stop with
different approach, movement, etc. Be sure that it complements the strategy plan
that you have, if not, no matter how good your profit protection is, it won’t
make any difference.
Feature
#6: Drawdown Minimizer
This is another feature that really makes your
bot special. The same with the feature #5, the bot developer may not be that
willing to reveal his secret on how to minimize drawdown as it may be copied by
other developers.
Most of the developers of successful bots out
there didn’t want to sell their masterpiece at first. But as their business
inclination becomes higher than being greedy, most of them would decide to make
their robot available in the market. It is a business common sense thing. Why
would multi-billion-dollar businesses get richer? They do because of multiple streams
of income. Even if your Forex system earns you 10%-500% percent a month, still
you won’t surpass the earning speed of successful businesses that earn money
from different sources.
Feature
#7: Hard Stop-loss Option
This is an option to put a fixed Stop Loss with
specific number of pips. This may hurt your fund once in a while but if you can
backtest first the bot and get a good result, you can try to put a hard SL in
your bot execution.
If your bot has a hidden calculated stop loss,
you shouldn’t bother to put this as it may hurt your fund. It may destroy the
logic of the script. Developers put a hard stop loss option only for those
traders that can not sleep if their trades have no SL.
Feature
#8: Time-based Stop-loss Option
This is an option to a stop loss that is
triggered after specific number of minutes, hours, or days. This approach is
logical because there are pairs that may really reverse on your entry if not
profitable after a number of minutes, hours, or days. You need to back test the
bot first on each pair to know the time period applicable on each pair.
Feature
#9: High-spread Protection
Most of the time, but not always, a scalper
robot is dependent on a low spread execution to be successful. So having a pair
with high spread may not give a satisfactory result that you want. An option to
choose a low spread execution of entry is a good option that you have to find
to make sure that you can have more profitable trades than losses. An option to put the spread limit that you
want is also vital as it will be flexible and can adapt on each currency pair.
Feature
#10: Trailing Take-Profit
Yes, you read it right. It is a TRAILING
TAKE-PROFIT. We are all familiar with the Trailing Stop-Loss but may be this is
your first time to hear a Trailing Take-Profit strategy. Some scalping bot may
have this feature but traders who buy them are not aware of this. Read
carefully the bot’s description if it has this function. That’s the only way to
know if the bot has it. Or, you can contact the developer to ask directly.
Trailing Take-Profit is a feature that makes
the TP price level of all open trades to be moved near the current price and
will still give a positive overall profit or very small loss.
These 10 tips are just excerpts from my
upcoming ebook about Expert Advisor. To get a FREE copy of the ebook please
join my FB Group below
To learn more Forex tips, please like our FB
Page:
And please visit my blog: http://FXFlight.blogspot.com
As a final tip, if you haven’t got your Forex
Robot yet, you can try Solomon’s Chest PRO, a bot that I personally developed.
It has some of the features mentioned above so you already have an edge when
running it. Here is the link of the bot:
Here's the link of bot's MyFXBook account
http://www.myfxbook.com/members/okpinoy/solomon-chest-pro/1732850
Good Luck To Your Trading Carreer :)
No comments:
Post a Comment