Every now and then I borrow ChatGPT's power, Episode 174【EA can anticipate risk from backtesting】
FX Automated Trading, the EA developer Reiwa's Doublei-E.
This series has been written aiming for a daily post since last year.
Probably it has continued for about a year and a half now!
If you read what has been written so far,
you’ll surely come closer to better EA operation, I’m confident.
Also, there are times I want to take a short break,
so I’ll continue posting with the help of ChatGPT.
Occasionally, I will post irregularly as I have done before.
EAs can estimate risk from backtests
FX automated trading・EA developer: Reiwa's Doublei-E.
Backtests are not only about “verification of past performance”
As I’ve explained so far, a principled EA developer builds EA based on backtests.
Then, is the role of backtests only to check whether it can win?
In fact, it’s not just that.
By using backtest data as evidence, you can concretely anticipate the risks in EA operation.
Objective data = operations not swayed by emotions
In discretionary trading, emotions inevitably influence decisions.
“If I had taken profit here…”
“If I waited a bit longer, maybe I could have avoided a loss…”
These doubts often enlarge losses.
On the other hand, backtest results provide objective numerical data without emotion.
You can base risk estimates on metrics like maximum drawdown and recovery factor, enabling calm capital management in EA operation without being swayed by feelings.
What is “evidence-based risk management”?
Based on objective data from backtests,
how much capital is needed
and what lot size should be used
to withstand the expected drawdown
you can achieve this kind of “calculated balance of funds and lots.”
This is essentially like following the “dosage” when taking medicine.
If properly followed, you can realize the EA’s true performance.
Summary
Backtests are not only about “whether it wins” but also provide the basis for risk estimation
It’s important to manage funds based on numerical data rather than emotions
This is the method of risk management for evidence-based EA
? From Reiwa’s Doublei-E
“EA is not a dream tool, but by utilizing backtests you can operate with confidence through evidence-based risk management!”
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【Flow from starting EA to intermediate level】
First, it’s important to master “installing EA.”
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MT4 EA (Expert Advisor) and Indicator installation steps
https://www.gogojungle.co.jp/post/1/8212
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※GogoJungle video version※
Even at the start, not everything can be understood all at once, and some may stumble quite a lot.
I also stumbled many times in the beginning, so don’t rush and you’ll be fine!
If you don’t understand something, there is a “Contact form” you can use!
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■ GogoJungle “Contact Form”
https://www.gogojungle.co.jp/inquiry
【How to choose an EA】
Now that you feel you can operate an EA,
you might think, “I don’t know which EA will win… I don’t want to lose…”.
So Reiwa’s Doublei-E has published,
to a certain extent, articles that help understand the pros and cons through backtests.
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https://www.gogojungle.co.jp/finance/navi/series/1714
【How should EA risk management be done!?】
And, no matter how excellent an EA you obtain,
if you neglect risk management, FX will fail.
So for EA, how should risk management be done!?
The following articles answer this.
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■ “How to calculate EA risk management”
https://www.gogojungle.co.jp/finance/navi/articles/64703
【EA operation mindset is also important】
And, to sustain EA operations long-term, the “EA operation mindset” is also important.
Those articles are found at,
12/30★ Year-end and New Year SP!! EA Thorough Course Part 3
https://www.gogojungle.co.jp/finance/navi/articles/80551
8/12【Obon Holiday Special】 Now you too can be an EA Master! “Mindset for Improving EA Operation”
https://www.gogojungle.co.jp/finance/navi/articles/72829
8/17【Obon Holiday Special】 Now you too can be an EA Master! “ cautions during EA operation”
https://www.gogojungle.co.jp/finance/navi/articles/73797
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With that said,
the content is quite substantial and very important,
so even if you don’t understand it immediately, please make sure to read it!
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https://www.gogojungle.co.jp/users/112481/products
（Portfolio construction requires diversification across genres）
【Reiwa’s Doublei-E Beliefs】
Develop EA through proper methods,
to gain the long-term support of many people,
and to maintain a sustainable WIN-WIN relationship,
with aims to energize the EA market and raise literacy.
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