Point #6 of the EA evaluation framework eliminates more dangerous EAs than all other points combined.
"Defined Risk After Losses"
Sounds simple. It's not.
Most traders think they understand EA risk management. Then they discover their "conservative" EA uses hidden martingale and blows their account during the first volatile week.
Today I'm exposing what Point #6 really means – and the specific questions that separate professional EAs from account killers.
Why Point #6 Matters Most
The Hidden Danger
EA marketing focuses on wins. Point #6 focuses on losses.
Here's what most evaluation frameworks miss:
- Point #1-5 tell you if an EA can make money
- Point #6 tells you if an EA can keep you in business
Real example:
- EA passes Points 1-5 with flying colors
- Myfxbook verified, logical strategy, good exits
- Point #6 reveals unlimited position scaling
- Result: 89% of users lose money during first drawdown
The Professional Standard
Professional traders ask different questions:
Amateur question: "How much can this EA make?"
Professional question: "What's the worst-case scenario?"
Point #6 answers the professional question.
Deconstructing Point #6
The Complete Framework
"Does the EA have clearly defined risk management after losses?"
This breaks into 4 critical sub-questions:
1. Position Sizing Method
What you need to know:
- Fixed lots vs dynamic sizing
- Scaling factors if used (1.3x max for controlled recovery)
- Maximum position size limits
- Account percentage caps
Red flags:
- "Advanced position management" without specifics
- No maximum scaling limits mentioned
- Vague "intelligent lot sizing" claims
2. Maximum Drawdown Limits
Professional standard:
- Hard-coded maximum drawdown (6-8% acceptable)
- Automatic trading suspension at limit
- No manual override capabilities
- Clear recovery procedures
Amateur warning signs:
- No maximum drawdown specified
- "Historically low drawdown" without limits
- Drawdown depends on "market conditions"
3. Loss Recovery Strategy
Controlled approaches:
- Limited scaling with defined multipliers
- Maximum number of recovery attempts
- Automatic reset after single win
- Clear stop-loss at account level
Dangerous approaches:
- Unlimited recovery attempts
- "Never gives up" mentality
- No account-level stops
- Manual intervention required
4. Transparency Level
Professional disclosure:
- Complete risk methodology explained
- Worst-case scenarios documented
- Historical maximum drawdown shown
- Recovery statistics provided
The Point #6 Audit Process
Step 1: Demand Complete Documentation
Essential questions for EA developers:
- "What's the exact position sizing formula?"
- Should get mathematical formula, not marketing speak
- Example: "Base lot × 1.3 after first loss, maximum 1.5x"
- "What's the maximum possible drawdown?"
- Should get specific percentage, not "low risk"
- Example: "6.8% maximum, automatic suspension at 7%"
- "How many losing trades before the system stops?"
- Should get exact number, not "intelligent management"
- Example: "Maximum 3 scaled positions, then pause"
Step 2: Verify Against Live Results
Cross-reference claims with Myfxbook data:
- Does actual maximum drawdown match claimed limits?
- Have the scaling limits ever been exceeded?
- What happened during worst losing streaks?
Red flag example:
- EA claims "5% maximum drawdown"
- Myfxbook shows 12% drawdown period
- Developer excuse: "Market conditions were unusual"
Step 3: Test the Worst-Case Logic
Scenario testing:
If EA has 10 losses in a row: - What's the position size on trade 10? - What's the total account exposure? - Does the system automatically stop? - How does recovery work?
Professional EAs will have clear answers. Dangerous EAs will dodge these questions.
Common Point #6 Failures
Failure Type 1: Hidden Martingale
What you see:
- "Smart recovery mechanism"
- "Advanced position management"
- "Intelligent lot sizing"
What it actually is:
- Unlimited position doubling
- No maximum exposure limits
- Account destruction during volatile periods
How to spot it:
- No specific scaling factors mentioned
- No maximum drawdown guarantees
- Vague language about "recovery"
Failure Type 2: Fake Limits
What you see:
- "Maximum 5% drawdown"
- "Conservative risk management"
- "Defined stop losses"
The reality:
- Limits can be manually overridden
- "Stop losses" are suggestions, not hard stops
- Drawdown limits reset during "good periods"
How to verify:
- Ask for hard-coded proof
- Check if limits have ever been exceeded
- Verify automatic enforcement
Failure Type 3: Incomplete Disclosure
What's missing:
- Worst-case scenario documentation
- Complete risk methodology
- Historical extreme examples
- Recovery time estimates
Why it matters:
- Incomplete information = hidden risks
- Professional traders need complete picture
- Transparency indicates confidence
Controlled Recovery vs Martingale
The Professional Approach (Acceptable)
DoIt GBP Master example:
- Base position: 1% account risk
- First recovery: 1.3% (controlled scaling)
- Maximum: 1.5% (hard limit)
- Total exposure cap: 6.8% of account
- Automatic pause after 3 losses
- Reset after single recovery win
Why this passes Point #6:
- Specific limits clearly defined
- Maximum exposure mathematically limited
- Automatic enforcement mechanisms
- Complete transparency about method
The Dangerous Approach (Fails Point #6)
Typical martingale system:
- Base position: 1% account risk
- Recovery: "Doubles until recovery"
- Maximum: "No limit needed due to high win rate"
- Total exposure: "Managed dynamically"
- Stop mechanism: "Manual oversight"
- Reset: "After full account recovery"
Why this fails Point #6:
- No specific limits defined
- Unlimited exposure potential
- No automatic protection
- Vague, non-specific language
The Point #6 Scorecard
Scoring Criteria
Full Point (1.0) - Professional Standard:
- Complete risk methodology documented
- Specific scaling factors with hard limits
- Maximum drawdown mathematically limited
- Automatic enforcement mechanisms
- Transparent about worst-case scenarios
Partial Point (0.5) - Acceptable with Concerns:
- Risk methodology mostly clear
- Some limits defined but not comprehensive
- Manual oversight required
- Limited transparency
Zero Points (0.0) - Dangerous:
- Vague risk management descriptions
- No specific limits provided
- Unlimited scaling potential
- Poor or no transparency
Real Examples Scored
Professional EA - 1.0 points:
"Uses 1.3x position scaling after losses, maximum 1.5x, hard stop at 6.8% account drawdown, automatic suspension after 3 consecutive losses, complete methodology documented."
Amateur EA - 0.0 points:
"Advanced risk management system adapts to market conditions using proprietary algorithms for optimal position sizing and recovery."
Implementation for Traders
Your Point #6 Checklist
Before considering any EA:
- ☐ Risk methodology completely documented
- ☐ Specific scaling factors provided (if any)
- ☐ Maximum drawdown limit specified
- ☐ Automatic enforcement confirmed
- ☐ Worst-case scenarios explained
- ☐ Historical maximum drawdown verified
- ☐ Recovery mechanism transparent
If any box is unchecked, the EA fails Point #6.
Questions That Expose Bad EAs
- "What happens after 5 losses in a row?"
- "What's the maximum possible account drawdown?"
- "How does the system automatically protect my capital?"
- "Can you show me the worst historical drawdown period?"
Professional developers will answer enthusiastically. Scammers will dodge or deflect.
Integration with Other Points
Point #6 Validates Other Points
Synergy with Point #1 (Myfxbook):
- Verified accounts show actual risk behavior
- Claims can be cross-referenced with reality
- Historical data validates risk limits
Synergy with Point #4 (Session Filtering):
- Risk management during different market conditions
- How system behaves during high volatility
- Protection during news events
Connection to High Win Rate Trading:
- As covered in our analysis of 82% win rate EAs, higher win rates enable different risk approaches
- Controlled scaling becomes mathematically favorable
- Point #6 ensures the scaling remains controlled
Your Action Plan
This Week:
- Audit current EAs using Point #6 criteria
- Score each EA using the 0.0-1.0 system
- Identify any EAs with incomplete risk disclosure
Next 30 Days:
- Demand complete documentation from EA developers
- Verify risk claims against Myfxbook data
- Phase out any EAs that fail Point #6
Long-term:
- Never compromise on Point #6 standards
- Help others understand risk management importance
- Support transparent developers who embrace full disclosure
The Bottom Line
Point #6 isn't just another checklist item – it's your account's life insurance.
Most EA disasters happen because traders focused on profit potential and ignored risk reality. Point #6 forces you to confront the uncomfortable questions before they become expensive lessons.
The rule is simple: If an EA developer won't clearly explain their risk management, they don't deserve your money.
No exceptions. No compromises. No "trust me" stories.
Your account balance depends on it.
Your Next Steps
🔥 Download the Complete 7-Point Checklist – Get the full framework including detailed Point #6 evaluation criteria.
Remember: Professional risk management isn't optional – it's the foundation of sustainable trading success.
FAQ
Q: What if an EA has great performance but fails Point #6?
A: Walk away. Great performance without proper risk management is unsustainable. Eventually, the hidden risks will surface.
Q: Can an EA pass Point #6 with any position scaling?
A: Yes, if scaling is controlled, limited, and fully disclosed. The key is transparency and hard limits, not the complete absence of scaling.
Q: How do I verify automatic risk enforcement?
A: Ask for code proof or demo account access where you can test the limits. Professional developers will provide verification methods.
Q: What's the difference between Point #6 and general risk management?
A: Point #6 specifically evaluates the EA's built-in risk controls. Your personal risk management (position sizing, portfolio allocation) is separate but equally important.
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