How to Reduce Drawdown in XAUUSD M15 EAs?

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Hello traders,

I have been working on algorithmic strategies for XAUUSD (M15 timeframe), and one of the biggest challenges I face is controlling drawdown while maintaining solid profitability.

In your experience:

- What risk management techniques work best for gold?
- Do you prefer fixed lot or percentage risk?
- How do you filter high-volatility sessions?
- Do you pause trading during news events?

I would appreciate hearing your thoughts and experience.

Thanks in advance.
 

Unless you can predict the future, the only way to control drawdown is to control 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 You place the stop where it needs to be — where the reason for the trade is no longer valid.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.

 
Ebas:
- What risk management techniques work best for gold?

A fixed stop combined with a dynamic exit. You need to statistically determine the point (in actual points) of loss at which price is more likely than not to continue going against your trade(s). That will be your fixed stoploss. When price is going with your trade(s), you need a dynamic exit. This can be a trailing stop, an ATR multiplier, a line study indicator, etc. The underlying idea is to cut your losses on trades that are statistically unlikely to make it anyway, and to literally have no cap how far your profitable runners can run. The MT5 Strategy Tester is your friend here. It generates nothing but statistics.

Ebas:
- Do you prefer fixed lot or percentage risk?

I recall having read an empirical study of fixed lot/trade sizing versus variable lot/trade sizing throughout the lifetime of a strategy, and the conclusion was clear--fixed lot/trade sizing is the way to go. Of course, the study only discussed strategies that trade one position at a time.

Ebas:
- How do you filter high-volatility sessions?

A truly good swing trading strategy will absorb high volatility and keep on trucking profitably. Switching to a higher timeframe or a timeless custom chart can help with this, unless you're absolutely married to the M15 timeframe.

Ebas:
- Do you pause trading during news events?

I didn't, until I decided to code a prop firm compliant EA. To my pleasant surprise, this allowed me to decrease my custom chart specs. This should apply to standard timeframes as well.

 

Hello Ebas and fellow traders,

I agree that controlling drawdown in XAUUSD M15 EAs is a tough nut to crack, especially with gold's volatility. From my perspective, (almost) always there's a risk management model that can fit virtually any situation—it all boils down to the trader's objectives: your risk appetite, the maximum drawdown you're willing to tolerate, the desired risk of ruin, and so on. Equally or more important is the performance profile of your trading system itself.

For example, trend-following systems often have a low win rate but make up for it with larger gains on winning trades, offsetting many small losses. In these cases, it's common to start small and scale in (increase exposure) as the trend confirms, allowing you to capitalize if it continues while keeping initial risk low. On the flip side, mean-reversion systems typically boast a high win rate, so you'd need a different approach—perhaps tighter stops or position sizing that emphasizes preserving capital during rare but sharp drawdowns.

Regardless of whether you're trading XAUUSD or any other instrument, these principles generally apply. They transcend the asset class and focus on aligning risk management with your strategy's DNA. In my view, the key is to first run backtests with a fixed position size to uncover the true performance profile of the system (win rate, average win/loss ratios, etc.). Only then should you develop a tailored position sizing and risk management strategy based on that profile. Once you have the performance profile, it's possible to comment more specifically on the topic and refine ideas.

 
Ebas:
Hello traders,

I have been working on algorithmic strategies for XAUUSD (M15 timeframe), and one of the biggest challenges I face is controlling drawdown while maintaining solid profitability.

In your experience:

- What risk management techniques work best for gold?
- Do you prefer fixed lot or percentage risk?
- How do you filter high-volatility sessions?
- Do you pause trading during news events?

I would appreciate hearing your thoughts and experience.

Thanks in advance.

Hi Ebas 

Drawdown on XAUUSD can be reduced by combining trend filtering, controlled pyramiding with reduced risk on additional entries, structure-based stop placement, and a strict limit on total open positions. In my experience, risk control is not about one setting alone, but about how these layers work together.
 
Ebas:
Hello traders,

I have been working on algorithmic strategies for XAUUSD (M15 timeframe), and one of the biggest challenges I face is controlling drawdown while maintaining solid profitability.

In your experience:

- What risk management techniques work best for gold?
- Do you prefer fixed lot or percentage risk?
- How do you filter high-volatility sessions?
- Do you pause trading during news events?

I would appreciate hearing your thoughts and experience.

Thanks in advance.
set up a daily drawdown limit in a percentage of the balance , and close all trades by the end of the day , no carry forward of the trades as gap up and gap down can cause a major drawdown, these two worked for my recently developed EA. 
 
1. Single entry with TP and SL + trailing SL once in profit.
2. Dynamic lot based on equity.
3. One simple way is to use news filter EAs to turn off auto trading during high impact news period.
4. No because I use a breakout strategy in which high impact news will be beneficial for my strategy. 
 

Let’s say you have a strategy that gives you a 10% drawdown and a 200% return over 10 years, and a second strategy that has a 5% drawdown but delivers a 150% return over the same period.

Many traders would choose the second strategy and disregard the first one, since the second appears safer and allows for increasing risk to potentially achieve higher returns. However, combining both strategies could lead to better overall performance.

This idea is actually supported by Harry Markowitz in his portfolio theory. I would suggest looking into it, as it might be helpful.

 
I prefer percentage risk. You can try ATR based trailing stops to help with dd. Always pause during news. Also you can use ATR to filter high volatility events.
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