How many times have you purchased an EA, watch it make some money for a few weeks, and then promptly lose all of those winnings and more a month later. Yes, you are in a drawdown, and you won’t know how long that drawdown will last. And how much money you will lose.
So you switch the EA off in disgust. You have spent $200 buying the EA, and now you have lost another $300 of your $1000 trading account.
A few months later you are tempted to try the EA again, but by now you have also seen another EA which appears to be much better. So you buy that one for $250 and trade it on the $700 that is left in your trading account.
But much the same thing happens. This time you go into a short drawdown but then the EA starts winning and you are making money. Happy days are here again. Unfortunately, six months later, the EA goes into a drawdown and you start losing all the profits you had made.
What do you do? Stop the EA? Keep it going and hope it turns around soon?
So what is going wrong, and what can you do?
The problem is that all EAs are built to work well but only under certain market conditions. When those conditions change, as they will, the EA has only a very limited ability at best to adjust to the new conditions. And hence they start losing money.
Those changed conditions may or may not last long, and so we just don’t know when the EA will be trading profitably again.
If we keep chasing the market we may keep losing. We need for the market to come to us.
So imagine if we could somehow determine in real time when the market has come to us and when it has not, and then only have the EA trade during those good times.
Wow, we would avoid the big losses and be making money!!
Let’s look at some real live examples.
In the images below we can see the performance graphs of four versions of a popular EA, each of which has been trading for just under two years on an independent EA testing site.http://www.forexverified.com/
All except one are currently in profit. So overall the performance is not bad. You just need patience and would have needed to have started during an uptrend in performance.
But now look at what the performances would have been like for each of these four cases if the EAs had not been trading during the periods shown in the red rectangles, the drawdown periods. You would have avoided some large losses in each case. And you would have slept better at night not having to watch your EAs losing money head over foot as they go into long drawdowns!
In the worst performing EA (top right), you would have had no trading for about a year and a half but by the end of two years the EA would actually have been in profit by about $1000 instead of a loss of $2000!
How can we do this for our EAs?
We then run our EA on a demo account together with the EA Controller. And we let the Trade Copier copy the trades to our live account, but only when the Controller gives the all clear. That is, only when a certain profit condition is met. In other words, only when market has come to us.
So goodbye to drawdowns, welcome to profits. Get all the details at FX EA Controller