Robots trade with a set of ideology and it is important that the user understands it.
In circumstances when the user are unaware of how the robots are traded, the maximum draw-down* will be unknown to them. All PROFITABLE trading robots are sure to make losing trades and when the users are faced with 5 consecutive losing trades, they will be experiencing great fear and may stop them from following the system.
(Maximum draw-down: This is the largest overall drop in the investment’s value which occurred in a given period before it returned to its previous high. Large maximum draw-downs indicate higher risk.)
Had they known how the system traded, how it performed the past 10 years and the maximum consecutive losses, they will not have panicked. They will be well aware and mentally prepared to accept the losses. If the system traded for the last 10 years have a maximum consecutive loss of 5, the well-informed user will be expecting for a win with the next trade and not fearing the system may have stop working.
Thus, knowing how the robots trade is CRUCIAL to Your Trading.
Here, we examine a few trading ideologies
- Work extremely well during certain times of the day only
- Take profit is usually a few pips only
- Stop loss level is set many times more than their take profit level
- Extremely low risk:reward ratio
- However, they are compensated by very high accuracy trades (80% winners)
- Trades made are usually within very shot period of time (in mins to a few hours)
-High risk to reward ratio
- Low accuracy trades (40% winners)
- Trades are entered whenever there are signs of a breakout (means you will have many losing trades in conditions of a false breakout or ranging conditions)
- Due to high risk to reward ratio, one winning trades can make back all of the losing trades
- Usually do not have a fixed take profit, take profit is trailed by a moving average or 2 bar low/high
- Trade made can last for many days
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Warren examines commercial trading systems and has since started researching and analysing systems to uncover good systems which bring in consistent profits. By publishing all the research papers and detailed analysis online, he seeks to educate potential investors and traders on the world of trading the forex market with automated systems.
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