At what point should the automatic adviser stop working? At the time of the loss? And if the loss is within the statistical, taken on the basis of testing? Or if the loss is one-time due to anomalies and the system recovers quickly? The psychological factor also plays a role, which pushes either to stop the robot in a panic after the first major drawdown, or, on the contrary, to wait until the last, hoping to win back the loss.
Everything is simpler: the rules for stopping the Forex trading system are based on the results of the TS testing and equity analysis.
Rules for stopping the Forex trading system
In most cases, according to some signs, you can determine the end of the system’s life even before it brings a loss and re-optimize it. And also, in some cases, loss is not yet a sign of a vehicle problem. When optimizing the system for a period of 60 months, the Forex trading system lives for about 7-15 months.
Parameters for assessing the viability of the trading system:
Analysis of the actual performance with the expected
Analyzed in conjunction with other parameters. If at the end of testing you expect the deposit to grow by 30% for the year, and the system for the first 3 months showed an income of 1% per month, then:
- Compare the time periods of actual and test trading. Perhaps a sharp increase in profitability is still ahead;
- we analyze changes in indicators of losing trades. If the real account, along with the profit, is reduced and losses in the same proportion, the system works correctly, but conservatively.
Comparison of maximum drawdown with allowable
If the maximum drawdown on a real account is outside the test value, this is a signal that the system works with deviations. The decision to stop is made individually (depending on the amount of the deposit, lot and personal risk management). It is believed that after the 50% drawdown is exceeded, the system should be stopped.
Comparison of a series of losing trades with statistical data h4>
Testing showed the maximum number of losing trades in a row – 6. Once on a live account the series goes outside, it’s time to stop the robot. This is a convenient approach from a psychological point of view, since a series of 4-5 losing trades is the norm, that is, there is no reason for excitement. MT4 Tester allows you to evaluate 2 parameters:
- maximum series of losing trades;
- The average value of continuous losses over the entire period of the system.
It is better to focus on the first parameter, provided that it is not an anomaly. But if in the second parameter the deviation from the test value is more than 10% to a large one with a thoron, and the same parameter for profitable transactions remains within the normal range, then the Forex trading system does not work correctly.
It is not recommended to exit the market at the time of the loss (a classic mistake). The system will turn around and make some profit. And here the second classic mistake is the hope that after the profit the system will return to the previous figures. Will not return if there are signs of insolvency. We close the position after the average series of profitable transactions and re-optimize (reconfigure) the system.