EA Risk Management: Position Sizing, Max Drawdown Limits, and a Simple Risk Budget
Most people don’t blow accounts because the EA “stopped working”.
They blow accounts because they ran the EA with the wrong risk.
Too much size. Too much exposure. Too much confidence after a good week. Too many EAs stacked on the same account.
The irony is simple:
Automation removes emotional execution… but it doesn’t remove emotional risk decisions.
This post is an evergreen framework you can use to run MT5/MT4 EAs safely and consistently.
The #1 rule: risk matters more than entry logic
A great entry with bad risk management still fails.
A decent entry with solid risk management can survive long enough to compound.
So if you want one mindset shift:
Stop looking for the perfect strategy.
Start controlling the downside.
Step 1 — Choose a risk model that you can actually live with
If you can’t sleep with your risk settings, you’ll interfere, tweak, and sabotage the system.
Use simple categories:
Conservative (recommended for most people)
-
0.25% to 0.75% risk per trade
Balanced
-
1% risk per trade
Aggressive
-
2%+ risk per trade (only when you have data + experience)
If you’re testing, new to EAs, or trading volatile assets like Gold, start conservative.
Step 2 — Understand “portfolio risk” (the mistake that destroys multi-EA accounts)
Most traders do this:
-
run EA #1 at 1% risk
-
add EA #2 at 1% risk
-
add EA #3 at 1% risk
-
then act surprised when drawdown feels “too big”
Because the account isn’t experiencing “1% risk”.
It’s experiencing stacked exposure.
The fix: a simple risk budget
Instead of thinking “risk per EA,” set a budget for the whole account:
Example risk budgets
-
Conservative portfolio: 0.5%–1.5% combined
-
Balanced portfolio: 1.5%–3% combined
Then allocate that risk across EAs.
If you run a 2-EA portfolio, a simple structure is:
-
0.25%–0.5% per EA (conservative)
-
0.5%–1% per EA (balanced)
This single rule prevents most EA blow-ups.
Step 3 — Max Drawdown limits (your real “stop loss”)
Every strategy has losing streaks. The question is whether your account survives them.
So you need a portfolio-level limit:
3 drawdown lines that keep you disciplined
-
Alert line (when you stop adding risk): -3% to -5%
-
Cut line (when you reduce risk): -6% to -10%
-
Hard stop line (when you pause and reassess): -10% to -15%
You don’t need perfection. You need a rule that stops you from digging a hole.
Step 4 — The “compound madness” trap (why many EAs die after a great start)
This is the most common EA killer behavior:
-
account grows quickly
-
you switch to “compounding” or raise lot size aggressively
-
a normal drawdown arrives
-
the drawdown is now huge because size increased
-
you give back months of progress
Here’s the evergreen rule:
If you increase risk, do it slowly and on a schedule — not emotionally.
A simple approach:
-
only increase risk after a stable period
-
increase in small steps
-
never increase risk right after a big winning streak
Step 5 — Execution can amplify risk (especially on Gold)
Even if your risk settings are correct, execution can make drawdown worse:
-
spreads widen during volatility
-
slippage worsens entries and exits
-
stop-outs happen earlier than expected
That’s why broker choice is part of risk management.
Brokers I recommend for EA execution:
IC Trading – Raw spreads / low-cost trading
https://bit.ly/3KvI9RO
Pepperstone – Compatible with most EA strategies
https://bit.ly/4ophy72
If you’re running breakouts (especially XAUUSD), execution quality is not a “nice to have”.
A practical example: a simple 2-EA risk budget (USDJPY + Gold)
If you want a clean portfolio that’s diversified without complexity:
1) USDJPY Trend (H1)
JPY Trend EA ProTrading (74 USD)
MT5: https://www.mql5.com/en/market/product/157484
MT4: https://www.mql5.com/en/market/product/157485
2) XAUUSD Breakouts (M15)
Gold Trend Breakout EA ProTrading (74 USD)
MT5: https://www.mql5.com/en/market/product/157465
MT4: https://www.mql5.com/en/market/product/157466
Simple conservative risk budget
-
Total portfolio risk: ~1%
-
USDJPY EA: 0.5%
-
Gold EA: 0.5%
Simple balanced risk budget
-
Total portfolio risk: ~2%
-
USDJPY EA: 1%
-
Gold EA: 1%
You’re not trying to “win every day.” You’re trying to survive and stay consistent.
If your goal is scaling, risk discipline matters even more (Axi Select)
Most traders approach scaling backwards:
They chase targets first, then try to manage risk later.
A serious system does the opposite:
-
stable risk rules
-
stable execution
-
stable testing process
-
THEN scaling
If you’re focused on capital allocation and want a model that aligns better with consistency than typical challenge grinding, compare Axi Select:
https://bit.ly/48TlcAc
Even if you don’t use it yet, it’s worth understanding because it rewards process more than “rush performance”.
Copy/paste EA Risk Management Template
-
Choose risk style
-
Conservative: 0.25%–0.75% per trade
-
Balanced: ~1% per trade
-
Set a portfolio risk budget
-
Conservative: 0.5%–1.5% combined
-
Balanced: 1.5%–3% combined
-
Define drawdown rules
-
Alert: -3% to -5%
-
Cut risk: -6% to -10%
-
Pause: -10% to -15%
-
No emotional compounding
-
scale slowly and on schedule
-
Use broker execution that supports EAs
-
IC Trading: https://bit.ly/3KvI9RO
-
Pepperstone: https://bit.ly/4ophy72
-
Scaling path to compare
-
Axi Select: https://bit.ly/48TlcAc
Quick Links (EAs + Brokers + Axi)
JPY Trend EA ProTrading (74 USD)
MT5: https://www.mql5.com/en/market/product/157484
MT4: https://www.mql5.com/en/market/product/157485
Gold Trend Breakout EA ProTrading (74 USD)
MT5: https://www.mql5.com/en/market/product/157465
MT4: https://www.mql5.com/en/market/product/157466
IC Trading: https://bit.ly/3KvI9RO
Pepperstone: https://bit.ly/4ophy72
Axi Select: https://bit.ly/48TlcAc
