9 Scariest Secrets of a Scalping EA that Will Cause You to Lose Money
5 February 2016, 21:22
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9 Scariest Secrets of a Scalping EA that Will Cause You to Lose Money
- Is a scalping EA being tested with ideal spreads, i.e. 0.5 or 1.0 pips? Your broker does NOT guarantee a tightly fixed spread so why are you testing with 0.5 pip spread? Backtesting a scalping EA under ideal conditions will produce false promises and will cause you to lose money in the long run.
- Does a scalping EA use stop loss less than 6 pips? Don’t get fooled by EAs with smaller stop losses. Your EA may work during back testing but will not be profitable under volatile live market conditions. Tight stop loss does not provide enough breathing room for market pullbacks.
- Does an EA behave similarly when trading with 1 lot vs. 0.01 lots? Brokers will seduce you and allow an EA to win when trading with a micro lot. When trading with larger mini or standard lots, slippage will occur, causing an EA to fail. This is known as a scalability test.
- Does the EA demonstrate that it can print money with very low drawdown and no risk? Similarly, if you own a goose that can lay golden eggs, would you sell it? If the results are too good to be true, then it is not likely to be real. You should examine the EA with fixed lot testing to reveal its true form.
- Has it been tested with more than a 10-year trading period? Don’t get fooled by EAs that are curve fitted over a few years. How does it perform during 2002 Equities Sell-off, 2006 Emerging-Market Crash, and 2008 Subprime Meltdown? History tends to repeat itself, and repetition is the mother of learning.
You can read the rest of the scariest secrets at – Robust Trader’s 20 EAs EURUSD
Winsor Hoang is the developer of ”Robust Trader’s 20 EAs EURUSD”, and he is an automated trading researcher since 2003. Winsor actively works with several high profile mathematicians, statisticians, computer scientists, and computational finance specialists.
