How to reduce Drawdown on a EA?

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Recently been developing a variety of EA:

  • Range Break Outs
  • ChoCh and Bos based (for long movements)
  • Swing High and Swing Low Sweeps
  • Etc...

During this process I find that making an EA profitable isn't the hardest part, just need to find a pattern an optimize till a point it works through a long time (4+ years), but I face a problem, how to reduce DrawDown? Been investigating and found that using strategies with negative correlations helps, but I'm not sure about this.

In my process of reducing Drawdown I've found that reducing the Risk Reward helps, but i'ts not a constante pattern...

Any ideas on this topic?

 

Loosing ten in a row is eventual; that's why Martingale doesn't work.

Reduce your risk. Just because your car can go 150 MPH doesn't mean you should. Just because you have a lot of margin, doesn't mean you should use it. Control your risk.

Risk depends on your initial stop loss, lot size, and the value of the symbol. It does not depend on margin or leverage. No SL means you have infinite risk (on leveraged symbols). Never risk more than a small percentage of your trading funds, certainly less than 2% per trade, 6% account total.

  1. You place the stop where it needs to be — where the reason for the trade is no longer valid. E.g. trading a support bounce, the stop goes below the support. Then you compute your lot size.

  2. AccountBalance * percent/100 = RISK = OrderLots * (|OrderOpenPrice - OrderStopLoss| * DeltaPerLot + CommissionPerLot) (Note OOP-OSL includes the spread, and DeltaPerLot is usually around $10/PIP, but it takes account of the exchange rates of the pair vs. your account currency.)

  3. Do NOT use TickValue by itself - DeltaPerLot and verify that MODE_TICKVALUE is returning a value in your deposit currency, as promised by the documentation, or whether it is returning a value in the instrument's base currency.
              MODE_TICKVALUE is not reliable on non-fx instruments with many brokers - MQL4 programming forum (2017)
              Is there an universal solution for Tick value? - Currency Pairs - General - MQL5 programming forum (2018)
              Lot value calculation off by a factor of 100 - MQL5 programming forum (2019)

  4. You must normalize lots properly and check against min and max.

  5. You must also check Free Margin to avoid stop out

  6. For MT5, see 'Money Fixed Risk' - MQL5 Code Base (2017)

Most pairs are worth about $10 per PIP. A $5 risk with a (very small) 5 PIP SL is $5/$10/5 or 0.1 Lots maximum.

 
William Roeder #:
Loosing ten in a row is eventual; that's why Martingale doesn't work.
Martingale also needs to be used with caution, and then it will work. I recently saw a signal using the Martingale strategy – it's been working since 2019.
 
Osmar Sandoval Espinosa:
Any ideas on this topic?

I'm not about to entirely poopoo RR (risk:reward) nor MM (money management) but I agree that neither of those can resurrect failed base strategy logic.

Osmar Sandoval Espinosa:
[N]eed to find a pattern an optimize till a point it works through a long time...

You've really hit the nail on the head here. Basically, you need to define confirmed trade entry conditions. Confirmation can be 2 or more line study indicators in agreement, the confluence of 2 or more trendlines, etc. In effect, your entries should be "slow." In contrast, you need to define instant trade exit conditions. This can be the last price bar closing on the opposite side of a line study indicator from which that bar opened, etc. In effect, your exits should be "fast." The underlying principle is that getting into the market is well contemplated while risk is cut off by a hair-trigger. 

To be clear, you still use a "safety stop" set well away from price but your dynamic exit lets your winners run and manages your risk.
 
"  I find that making an EA profitable isn't the hardest part, just need to find a pattern an optimize till a point it works through a long time (4+ years) "  It won't ,you are trying to find the Holy Grail that does not exist , Basically you are saying I can get winners but they turn into losers , So if you are winning initially then take the profit  at that point instead of thinking a bot can decipher random ( for retail traders ) markets . 4 + YEARS . Trade manual and win muchacho. Or the next best thing a hybrid which is the only thing that actually works for EA  success  far far away from Martingale 20 lines of code dressed up as machine learning .  Human override , Human management just like every bot in every other walk of life .  Take what's on the table and build piles of buffer rinse and repeat instead of getting to the last 10 pips of 70 and saying OH DAMN IT , IT TURNED TO DOODO . Money management trumps everything . 
 
Victor Paul Hamilton #:
"  I find that making an EA profitable isn't the hardest part, just need to find a pattern an optimize till a point it works through a long time (4+ years) "  It won't ,you are trying to find the Holy Grail that does not exist , Basically you are saying I can get winners but they turn into losers , So if you are winning initially then take the profit  at that point instead of thinking a bot can decipher random ( for retail traders ) markets . 4 + YEARS . Trade manual and win muchacho. Or the next best thing a hybrid which is the only thing that actually works for EA  success  far far away from Martingale 20 lines of code dressed up as machine learning .  Human override , Human management just like every bot in every other walk of life .  Take what's on the table and build piles of buffer rinse and repeat instead of getting to the last 10 pips of 70 and saying OH DAMN IT , IT TURNED TO DOODO . Money management trumps everything . 
Didn't quite get the point, could you describe it more?
 
Eh , No !! . The game is to be sold and not to be told . I explained enough . I won't do paint by numbers guide to succes . Just remember you said I find making an EA profitable is not the hard part . 
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