AI-Backbone
The world of trading is flooded with a myriad of promising Expert Advisors (EAs) vying for attention. Each one touts its exceptional qualities and strives to present itself in the best possible light. Yet, for buyers seeking a reliable and profitable EA, the task of comparing and making an informed decision has become increasingly challenging.
The real challenge lies in the concealed nature of an EA's true reliability, as vendors often keep vital information under wraps. However, a breakthrough method has emerged to uncover the genuine trustworthiness of each EA — an analysis focused solely on its live trading signals.
In this article, we will delve into the perils of relying on martingale strategies and the dangers associated with adding new positions while prices continue to plummet. Many traders, after testing various EAs and strategies, have come to a resounding conclusion: this approach is highly dangerous and inevitably leads to blown accounts over time.
To compound matters, EA authors have mastered the art of deception by cleverly disguising their strategies. They swiftly delete blown signals and replace them with new ones. As long as the new account remains intact — be it for a month or even a year — they shamelessly market the EA, leaving unsuspecting buyers in the dark about its true risks.
Secret 1: The Many-At-Once-Close Pattern
The closing times of positions provide valuable insights that can be found under the "Trading History" section of a signal. When multiple positions are closed simultaneously, and some of them result in losses, it should serve as a red alert.
This scenario indicates that the EA is employing a dangerous tactic of adding funds to a losing position as long as there are available resources. Extensive research conducted by numerous scientists over time has led to a unanimous conclusion: if an EA utilizes such a strategy, it is inevitable that one day, a novel market movement will emerge, ultimately leading to the depletion of your invested funds.
Example: Sum 9 Martingale EA
Upon initial examination, this EA appears to be highly profitable based on its performance. However, when we open the "Trading History" section, a series of positions exhibits a recurring pattern known as Many-At-Once-Close.
Analyzing this pattern reveals that the EA commenced with a position size of 0.08 lots and gradually increased it to 0.84 lots. While this scaling may be acceptable for an account size of $17,000, it raises concerns for smaller accounts.
Secret 2: Stop Loss to Take Profit Relation
When employing a strategy that aims to earn $1 while tolerating a drawdown of up to -$100, a deceptive phenomenon occurs. Such a strategy will endlessly wait for positions to turn profitable, misleadingly maintaining an upward balance curve that never declines.
Live signals provide a valuable tool known as the Maximum Adverse Excursion (MAE) graph. Despite the lack of official documentation on its interpretation, it holds immense significance for evaluating EAs.
A bad EA closes a position with a profit only after it has endured significant drawdown. This results in the dots on the MAE graph appearing on the right side of the vertical axis, deeply descending into negative territory.
A good EA closes positions before they encounter substantial drawdown, ensuring that the profit exceeds the vertical distance from the horizontal axis.
Example: Top Secret EA
With an impressive track record of no losing trades over 5 weeks, this EA certainly garners attention. However, the MAE graph reveals a concerning truth: to generate a profit of $24, the EA accepted a substantial drawdown of -$120 — approximately 30% of the entire account.
There is a possibility that in the future, the EA may either experience a catastrophic blowup or incur high losses exceeding the 30% threshold. Understanding these contrasting variants gives us valuable insights into an EA's risk management capabilities.
Originally published on June 17, 2023. Meanwhile MQL removed the MAE diagram feature for some unknown reason.