Drawdown & Balance Drop without Stoploss

 

Hi, someone please clarify, how the balance in the account will come down, when there is no stoploss given.  See the below image, it is showing a drawdown which is at the midlevel and the balance blue line is touching upto the bottom, sometimes during testing, the balance drawdown is going negative also.  How is this possible?

Someone please clarify, how the tester calculates that.  In the below image, the blue line which is the balance in the account, which is touching the level 14 USD, whereas the equity drawdown is at 178 USD range.

<Image deleted. If you want to discuss specifics of your EA, you must attach the source code>

 
Sathish Justin: Hi, someone please clarify, how the balance in the account will come down, when there is no stoploss given.  See the below image, it is showing a drawdown which is at the midlevel and the balance blue line is touching upto the bottom, sometimes during testing, the balance drawdown is going negative also.  How is this possible? Someone please clarify, how the tester calculates that.  In the below image, the blue line which is the balance in the account, which is touching the level 14 USD, whereas the equity drawdown is at 178 USD range.

You are probably using martingale/grids/same-symbol-hedging with multiple positions open.

Since positions are closed one at a time, the sequence in which they are closed affects how the balance is updated.

For example lets say there are two opposite positions, one with a loss of $100 and the other with a profit is $100, with a net result of $0.

  • If you close the losing position first and then the winning one, then your balance will drop $100 before returning to the initial balance.
  • If you close the winning position first and then the losing one, then your balance will spike $100 before returning to the initial balance. 
Moral of the story: martingale/grids/same-symbol-hedging don't work and will deplete your funds. Do the maths and you will see why (see next post).
 

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Dumb or Genius strategy? you decide [MT4]

Fernando Carreiro, 2022.11.04 20:02

It's called "maths", and your own "DetailedStatement" graph shows exactly the results I am warning about. Any Grid system will eventually suffer great losses when it becomes unbalanced. A grid system is just another way of doing the "martingale" thing. Both suffer from the same problem. They delay or hide the drawdown that is building up, while building up the deposit load until it reaches a point it cannot be sustained any further. They make many small profits that build up, but then when a loss occurs it is enormous and wipes out all the previous gains.

Your equity curve in your attached image is a clear example. It shows a steady rise, followed by a massive quick drop. And please don't say "but that was just me loosing focus" or "my strategy has special safe guards". They all say that. There are hundreds of such signals here on the site of such equity curves that behave exactly the same as yours. Hundreds of of signals using grids or martingale that inevitable blow up and die.

You are not the first to claim you have found a "holy grail" in grid systems, nor will you be last. I too, went through that. But once it's "shine" disappears and you actually take the time to analyse the maths, you come to the conclusion that it was all a waste of time, money and effort (but at least you can then move on to learning to do it properly).

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Any great idea about HEDGING positions welcome here

Fernando Carreiro, 2018.09.17 21:17

For those of you that want to learn to see the "light" and not fall into the trap of "hedging" and Grid strategies, here is the basic math:

How to Calculate the Net Resulting Equivalent Order:


Learn to do your research properly! Do not be blinded by false promises. Do the math!

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calculate tp for a basket of positions

Fernando Carreiro, 2022.04.17 18:44

There is no exact MQL code to give you, because it varies depending on the strategy and what information needs to be calculated. That is why I gave you the math instead for you to implement depending on your requirements.

The math is self explanatory, but if you are having difficulty with it, then I doubt you will be able to implement it in code, but here are the variables anyway:

  • vi = volume of individual position
  • oi = open price of individual position
  • ci = close price of individual position
  • Vn = total volume for a basket of positions
  • On = net mean open price for a basket of positions
  • Cn = net mean close price for a basket of positions
  • PLn = profit/loss for a basket of positions
The rest is in the math calculations.



     
    Fernando Carreiro #:

    You are probably using martingale/grids/same-symbol-hedging with multiple positions open.

    Since positions are closed one at a time, the sequence in which they are closed affects how the balance is updated.

    For example lets say there are two opposite positions, one with a loss of $100 and the other with a profit is $100, with a net result of $0.

    • If you close the losing position first and then the winning one, then your balance will drop $100 before returning to the initial balance.
    • If you close the winning position first and then the losing one, then your balance will spike $100 before returning to the initial balance. 
    Moral of the story: martingale/grids/same-symbol-hedging don't work and will deplete your funds. Do the maths and you will see why (see next post).

    Great Answer, my brain didn't think about this.  Yes you are right, it is the same symbol hedging with multiple positions open.  But i have a doubt, what happens in the real account on such scenarios, does this works in the same way.  For example, my account is having 100 USD

    I have two open positions, Buy & Sell, Buy is with a profit of 140 USD and sell is with a loss of 120 USD, so as a net 20 USD profit and my equity in the account will be 120 USD.

    When am closing the loss position of -120 USD, so my balance will become -20 USD and equity will be still 120 USD.  

    Does the negative balance allowed in the real account, do i need to worry about such negative balance in such cases?

     
    Sathish Justin #: Great Answer, my brain didn't think about this.  Yes you are right, it is the same symbol hedging with multiple positions open.  But i have a doubt, what happens in the real account on such scenarios, does this works in the same way.  For example, my account is having 100 USD. I have two open positions, Buy & Sell, Buy is with a profit of 140 USD and sell is with a loss of 120 USD, so as a net 20 USD profit and my equity in the account will be 120 USD. When am closing the loss position of -120 USD, so my balance will become -20 USD and equity will be still 120 USD. Does the negative balance allowed in the real account, do i need to worry about such negative balance in such cases?

    Yes, the same will happen on a live account.

    Did I not just warn you that "martingale/grids/same-symbol-hedging don't work and will deplete your funds"?

    Learn to trade without gimmicks and calculate your risk properly.

     
    Fernando Carreiro #:

    Yes, the same will happen on a live account.

    Did I not just warn you that "martingale/grids/same-symbol-hedging don't work and will deplete your funds"?

    Learn to trade without gimmicks and calculate your risk properly.

    Yes sir, i read the whole thing you shared and got the warning on martingale/grids/hedging.  But am just testing in the demo account on trial & errors basis to understand.  

    Trying the EA on a demo account.

     
    Sathish Justin #: Yes sir, i read the whole thing you shared and got the warning on martingale/grids/hedging. But am just testing in the demo account on trial & errors basis to understand. Trying the EA on a demo account.

    Ok, but now you know that what you saw in you back-tests will happen too on a live account (be it demo or real).

    Reason: