RISK MANAGEMENT IN FOREX USING MARTINGALE SYSTEMS
Do you know what TRADER means? - A crazy person who risks their own money for freedom, rather than exchanging their freedom for money
For any martingale system you need to allow a minimum of 3000 dollars for a standard account, which will be an aggressive setting, or 3000 cents for a cents account. THIS IS PER PAIR!!!. If you really want to trade save and relaxed then you can allow more but you still have to manage the whole account.
Sets that are optimized to trade only during a certain time are also less risky. Always make Autolot = False and never allow more than 1.5 multiplier. For less risky trading you can lower multiplier if you want, test it first. For more risky trading you can use $3000 for a standard account per pair or 3000 cents which is $30, but you have to find a risk setting that you are comfortable with. Try to diversify and not using too many usd pairs or too many chf pairs, or too many yen pairs, etc. Remember gbp pairs are more volatile. Avoid gbpjpy and euchf totally and keep yen pairs to just 1 per account. It is better to trade several pairs on a big cents account and diversify your risk than to trade 1 pair on a $3000 standard account. $3000 makes a 300 000 cents account leaving you with much more options to diversify and trade less risky and still make a steady income following conservative money management.
If you want to trade more than one EA on one account, try to diversify pairs and not trading for example gbpusd with each EA. I personally like to trade each EA on a different account.
Example of how to set up an account of $15 000 account (can be 15 000 cents) for very conservative risk:
1. Allow $5000 per pair, so for $15000 you will trade only 3 pairs at a starting lot of 0.01 and Autolot = False.
2. Decide on 3 pairs that are not correlated for example: eurusd; audcad, gbpnzd
3. Manage the account in the following way: If you see one pair in huge draw down, look at the other pairs, if one is just in slight loss, close the open trades and stop that pair until the one in draw down are out. Make sure your chart is clean and without trades and click on the NEW CYCLE button and make it red. The EA will not enter new orders until you activate it again. This will also help to free more margin until your account has recovered from that draw down. After the recovery of that pair you can activate the New Cycle button again
4. You can also use the Trend Wave indicator and look at the trend at higher time frames like Daily and H4. If they are both green then you can wait for the 15min to turn green and allow only buy trades by clicking on SELL OFF. Make sure that there are no open sell trades before doing this because if there are still open sell trades the EA will keep on selling until it is out of the cycle and will stop.
SELL OFF applies only to the FIRST trade, if there are already open sell trades and you don’t want more sell positions to be added then click on the orange PAUSE ON. (The opposite applies to buy trades)
5. Trade gold on a separate account preferable a cents account and not less than 10 000 but rather 20 000. For gold you have to manage the account to trade with the trend as far as possible!
Remember that gold can react on any unexpected news in the world and can wipe any account no matter how big it is! This is the initial lot size for a deposit that are recommended by some of the authors: Aggressive: Initial lot of 0.01 for each $3000 Moderate: Initial lot of 0.01 for each 10000 Conservative: Initial lot of 0.01 for 100 000 What to do when you have plenty of open positions and want to reduce risk?
I will explain here by referring to the chart panel of Trend Wave EA:
1. Using the PAUSE ON button on the panel: You can use the PAUSE button and switch it ON so that the EA won’t add more trades in the wrong direction. See this example where you want to stop the EA from keep on selling. The problem is if you do not allow more sell positions the EA will take longer to take profit as the TP price will go further away as the trend continues and the market needs to make a deeper retracement to get to your take profit. So rather do the following unless you have no margin left:
2. Changing the max lot: The better option (that is if you have enough margin) is to look at your current max lot, say it is 0.5. You can open the settings and make your max lot also 0.5. Now the EA will not multiple the following lot size but you will still get another order according to your distance settings. At least your TP line will move nearer to current price.
3. Making the distance bigger: You can change the “Distance” settings in the EA and make it bigger so that the EA will allow more space between trades
4. Making the multiplier smaller Make the multiplier smaller than what it was:
5. Changing the time frame: The time frame on the chart defines the amount of orders, if distance is met only one order per candle will be placed. You can switch over to a higher time frame for instance from 15m to 30m to reduce the amount of orders that will take place in future until your EA hits TP.
As you can see, you have to use the EA as a “tool” to manage your account. Now after reading this you will probably say “I want to make money fast it sounds too conservative.” You have to realize that unless you really know what you do, like the author – it is not easy to make big money consistently.
Rather make 5-7% per month than making 50% in the first month and blow it up in the second month. What happens is that these kind of traders start with a decent size account, then they blow it because they want to get rich quick. After that they scrape together a little bit of money, but because they want to make the loss back and do not have enough margin they blow it again. They are on a path of self destruction, and will keep on searching for the holy grail. What they do not realize is the problem is with them, not with the system. Every time they start a new account they think this will be the master piece!! This comes down to bad habits and no money management plan! An EA is just a tool, like a car - is a tool to get from A to B. You have to use it in a save way!!
This is my personal strategy and won’t suit everyone, different traders have different risk appetite I wish you a profitable and save journey in the forex world!
