Consecutive losses waiting for big win and splitting the risk

[Stefanos Ioannou]

What I have been trying to do in the past is manually make strategies that do consecutive losses (e.g. 15 pips each) until a big win happens (e.g. 60-80 pips). I was using 4-5 such strategies and then splitting the risk for each. I would allow each strategy to reach half of their max consecutive loss count on a demo and then start taking trades on live, splitting the risk among them. This was time consuming and a strategy which could do a max of 6 losses could suddenly do 10. As I have good capital and going with very low risk I am always taking profits. Small but profits.

I don’t know if its a good idea in the long run but with the EA studio, I can generate several such strategies and split the risk among 30 such EAs (when I find a way to generate such strategies). It is a lot of logistics to be checking between them and I am not yet sure how I will be optimizing (e.g. removing the ones that suddenly break the pattern of maximum X amount of consecutive losses) and executing (monitoring which reached the requirement of switching them to live trading). However I was wondering if you find this a good idea or a foundation to build something based on that. I used this in the past and passed an FTMO account and I know that things could have gone wrong so I am trying to figure out if this can be tweaked for a long-term approach.

[Cone D]

Interesting idea.

When you generate the EAs on EA Studio do you set the ranges of SL and TP only? Or you used something more in the acceptance criteria?

[Stefanos Ioannou]

The strategies I mentioned I created my own. But now I try to generate several such strategies with the EA.

I tried to simulate the finding of such strategies with the EA studio. So I set the SL and TP as I mentioned above and look for balance graphs that are ladders going down and then a big win upwards.

In the acceptance criteria I set a maximum consecutive losses. I find strategies that have this pattern in the last 6 months.

[Stefanos Ioannou]

I just passed another funded account using this technique.

I will be focusing on the way of Petko’s for the next couple of months as it seems to be tested thoroughly but in the future I’ll give this strategy a go and figure out how successful it can be and what kind of manual optimization can make it even better or a successful one. For now I understand that it can be used to get a funded account fast and with good rate of success. Possibilities are on the trader’s favor.

[Stefanos Ioannou]

As I’ve been stuck on the way to make EA studio work for me I decided to use it making a variation of my old consecutive losses strategy. Below I try to represent how I reached from one point of view to the other. I don’t immediately present my future strategy but I try to present my way of thinking so that if you find something useful yourself we can improve on and use it.

I have been finding EAs that have a max of two (2) consecutive losses the last 10 months, from the start of the year, and also have more than 80 trades. These trades must have a good ratio of win/loss between the trades. E.g. +40/-80 pips. Luckily I even found better than that but even that is good. Anything above 1:2 (0.5).

The plan now is to be recording each one and when they hit their 2 consecutive losses I can open a trade. The way I see it is that in such a case the possibility for a 3rd consecutive loss is less probable (not impossible of course).

Having this in mind, I am thinking of taking the next trade if it goes to  at least -10 pips first which will give me a better edge if the trade is a win (+50/-70) and less loss if it’s not.

Going with this needs patience and effort as it’s not automated. You have to be observing the trades that open/close and keep track in a journal.

 

Expanding from the initial approach above, for making it less probable for one EA case to go wrong and result in failure I am planning to divide the risk among several such cases, not just one. That means I will go with two EAs (or more) that have similar win to loss pips ratio and divide the risk between them.

And then my thought process is to be able to cover at least 4 consecutive losses. For example at any case 2 consecutive losses is a certainty, 3 is less probable and 4 is way not probable. Remember that in the last 10 months the max was 2.

Another approach of the previous would be to wait for the pattern of max consecutive losses to break and put the EA on a live account when there were already 3 consecutive losses. However I find this new approach very time consuming as if you have 10-15 such EAs running on demo it might take a month or more for one to break their max consecutive losses.

Now, I find that all these involves luck as well. As a result I would use it on a challenge account such us FTMO or an already funded account. On either of these I am sacrifing a specific amount of money. For a challenge, it’s like 150 euro for a 10k funded account if anything goes bad.

If we take into account that all these is still out of luck, which it is, one can simplify things. Wait for the first loss, and then wait for the second trade to reach a -40 pips or so which on a win will lead to +80 pips or at a loss, -40 pips. In such case the EA either made a big win or reached the two consecutive losses already which means the third one is more probable to be a win (according to the data collected). This approach is for making trades faster. The same way to thinking of splitting the risk between two EAs with the same win loss ratio could be engaged to handle possible losses of the first. Yet again this could still lead to double the losses but it makes such a scenario even less probable.
Following this last approach which by chance I succeeded on two cases the last months (achieved 2 funded accounts), I could still do this on the funded accounts. If successful on even one of them, it will lead to greater profits rather than losses. I have 300e on the line, at the same time profits can be 1000e+. And don’t forget the chances of making profit rather than losing both the accounts are heavily on my side.

Yet again…
Still not wanting to make things complicated but wanting to make a unified case in which the probability of taking a loss at the end is as less as possible. Let’s say you failed on one of such cases and risked 3% of an account. What is the probability of all this happening again on a consecutive try and still losing? The  what is the probability of losing  3rd time on a second account and even…. a 4th time on the second account so that you lose the whole account. My assumption is… not impossible but very very unlikely. Taking into account that i could still lose 300e for the funded accounts (or challenge account) I would have taken this risk a 100%.
I focused on this system for a funded account or a challenge of it because the benefit of getting one would be great reward and specific small loss. In a real account if you made a loss of 2-3% would have been difficult to generate it back and can put you in big trouble if you lost another 2-3% again. My idea on putting trades on a live account would be if only an EA that has a max of two consecutive losses in the past 10 months reaches four and then trading on a live account trade 5 and if lost trade 6 for the purpose of reimbursement of your lost funds on the lost funded account or even making an extra small profit out of it. I know that consecutive loss 5 and 6 are near impossible but it’s a relief to know that you can cover these as well.

 

Some notes:
1. For all these I use my brokers data, back tested on metatrader to make sure the data match and they are put on demo account to collect the consecutive losses first.2. When a trade losses I am going to be raising lot size enough that a win will make profit. Never risking a big % of my account, e.g. risking 2-3% max or a specific amount of money that I wouldn’t care.
3. I won’t and noone should chase losses. There is a probability that consecutive max losses could go really high. After putting down a plan I follow it. That means I have a specific amount or % of money I plan to lose if for whatever reason everything goes south. No gambling.
4. Some of you figured out a way to make the EA studio make you profitable EAs without all this hassle and automated everything with the samurai software and a copier. I didn’t that’s why you see this way of thinking and complicated execution haha

I know it seems a lot of a hassle. Although, it can be simplified for faster trades.What are your thoughts?
Also any ideas to make its success more probable? Or some more risk management? Or ways to simplify things?

[Petko Aleksandrov]

Great to see exciting ideas in the Forum 🙂

I like the one where you would wait for the consecutive losses to use the strategies and target the profitable trades.

Three things here:

• it might take a long time before it happens
• it might happen, then you might see just one positive trade, and again the consecutive losses
• as you said, it is a lot of manual work

I will think over everything you said and give you some tips. But I like the idea.

Moreover, the markets always go up and down. Just like with crypto nowadays. What goes up goes down. This is why I am recently always buying the dips(because the negative move is made).  I see it more and more with the EAs.

After they make the losses, it is time for profits. But keep in mind that we need to automate it. If you have an idea, we might suggest it as an update in the software.

[Petko Aleksandrov]

Great to see exciting ideas in the Forum 🙂

I like the one where you would wait for the consecutive losses to use the strategies and target the profitable trades.

Three things here:

1. it might take a long time before it happens

2. it might happen, then you might see just one positive trade, and again the consecutive losses

3. as you said, it is a lot of manual work

I will think over everything you said and give you some tips. But I like the idea.

Moreover, the markets always go up and down. Just like with crypto nowadays. What goes up goes down. This is why I am recently always buying the dips(because the negative move is made).  I see it more and more with the EAs.

After they make the losses, it is time for profits. But keep in mind that we need to automate it. If you have an idea, we might suggest it as an update in the software.

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