How to choose a “drawdown-resilient EA”

Hello, this is Dr. Neko, who takes care of you.

It's been a while, but I would like to write about EA contents in this investment navigation as well.
Here, I would like to discuss EA-related topics again.

Recently, on GoGoJungle, the EAs that were selling well and performing strongly have suddenly declined in performance,
and I think there may be people affected by this.
What we should consider here is,
“Why did I choose a drawdown-prone EA?”
“What should I do to avoid making the same mistakes in the future?”

I think these questions are important.
What I feel is the way to choose an EA that doesn’t go well is, for example,
in the following form.
(1) “Are others buying it now?” to decide which EA to buy

instead of evaluating the EA itself

(2) evaluating only the EA itself and choosing the EA to purchase

(3) assuming that “the third party recommending it” means it is a good EA,
and thinking straight about it

What do you think?

If you purchase an EA in the way described above,
there are relatively many cases where the post-purchase performance is poor,
I think.

What went wrong with (1)(2)(3)?

Then,
(1) Let’s look at them in order.

＝＝＝＝

(1) “Are others buying it now?” and buying the EA based on that
This is a tendency where beginners, in particular, have difficulty making judgments with their own eyes.

When you are a beginner at EAs, it is natural that you have little ability to choose an EA, so you tend to choose EA because “others are buying it” or because it is a popular EA.

However, when you consider that “people are buying it now,” there must be reasons for why they are buying it.

and end up selecting a dud EA.

This is an example of an EA like:
- The forward performance is very good

(but the backtest period is very short)
In such an EA, because the forward performance is good,
you may be attracted to it and
buying by many people may just be for that reason.

If you properly focus on the negative point,
“the backtest period is very short,”
you can decide that this EA should be approached with caution.

In this way,
just because “other people are buying it”
you buy an EA and fail to notice the negative points,
and as a result, the performance after activation deteriorates rapidly,
which is common.

===

(2) selecting by looking only at the EA itself

This is a bad example of evaluating only the deliverable (the EA) itself.

When I evaluate EA performance, I first check who the developer is.

If the developer has, for example,
• no track record at all
or
• overall performance of other released EAs is very poor
then, even if the new EA has great performance, I would be cautious.

Because EA is something created by people,
the EA from a developer who can produce good ones tends to be less likely to be a dud.

If there is no past track record,
or if past EAs are poor,
it is difficult to guarantee future performance,

and it is reasonable to assume the future results may be unknown or poor.

This is, statistically, the correct judgment.

In this way,
instead of evaluating only the EA itself,
considering the maker’s track record
greatly increases the likelihood of selecting a good EA.

===

(3) “Third-party recommended EAs” are good EAs, and thinking straight about it
This has also become a common promotional tactic recently.

Having a third party check the EA and give it a high评价?

This is a way to advertise that the EA is good.

However, in reality,
affiliates earn rewards by introducing or praising EAs,
so they tend to praise even bad EAs.

Therefore,
relying on the fact that “a third party is praising it” is also a bit risky,
as you might expect.

On this point as well,
you should, again, use your own eyes,
properly check items (1) and (2),
buy only the EA you are convinced of,
and check its actual performance in operation,
which will significantly raise your ability to choose good EAs.

===

In summary,

(1) “Are others buying it now?” and buying the EA based on that
⇒ check not only the good points but also the bad points

(2) evaluating only the EA itself
⇒ consider the developer’s past track record and experience in addition to the EA

(3) “Third-party recommended EAs”
⇒ think that it is good but also

the affiliate’s opinion tends to be biased toward the positive,
so take that into account

By adopting the above thoughts, you can significantly reduce the likelihood of choosing a dud EA.

Just because it is popular or because an affiliate recommends it,
keep these points in mind,
and always, using your own eyes,
evaluate EA performance and the EA author’s reputation from multiple angles,
then choose EA. You may see different results from before.

By the way,
I, as the user of GoGoJungle’s EAs,
aim for users to clearly “win” and “increase their assets.”
This is beneficial for users, GoGoJungle, and developers alike.

If the EA performs well only temporarily and many losing EAs are sold,
you may end up with a negative spiral:

buy EA → lose → assets decrease
→ there is no motivation to buy another EA

and so on. It is very important for developers and GoGoJungle to ensure users purchase winning EAs.

Some developers sell poor EAs and then disappear when performance worsens;
these developers exist, but increasing the number of developers who sell good EAs is crucial for the EA industry’s development.

Sorry for the length, but I hope the above will serve as a reference for everyone’s future EA selection.