3/30 (Sat) The importance of focusing on losses rather than profits for risk management
EA developer Reiwa's Double-E is here.
This time
“The importance of focusing on losses rather than profits for risk management”
is the topic.
When trading FX,
you think, “If I enter here and take profit here, I could make 100,000 yen!”
and tend to focus on profit,
often ignoring what happens if you lose.
And when you lose, sometimes you have capital that cannot fight again.
EA operation is the same,
saying, “With these settings, annual return of 50% is possible!”
or, “Things have been doing well lately, so doubling the lot size will double the profit!”
If you focus too much on profit and neglect risk management (though not truly),
you won’t think about what to do when you lose, so you’ll be flustered,
and you’ll only be able to watch your funds dwindle while biting your nails.
So, instead,
properly assess the EA’s performance,
how much loss could be maximum and expected,
and whether that expectation is within your tolerance,
then decide the ratio of capital to lot size accordingly.
For example
in compound interest trading, backtests for billions over 10 years are possible,
but that still takes “10 years.”
Therefore
if you push too hard on the EA’s short-term performance and bet too large,
you may see your funds dwindle long before “10 years” passes.
Ten years may feel long now, but
looking back, ten years passes quickly.
Since “every moment is the youngest you’ll ever be,”
let us plan with the next 10 years in mind.
Well then!
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【Reiwa’s Double-E EA Listing】
https://www.gogojungle.co.jp/users/112481/products
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【Reiwa’s Double-E Series Articles】
■ EA Beginner’s Course
https://www.gogojungle.co.jp/finance/navi/series/1700
■ Unreserved! Gorogo Jungle Problem Posing!
https://www.gogojungle.co.jp/finance/navi/series/1701
■ Double-E FX Ramblings
https://www.gogojungle.co.jp/finance/navi/series/610
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【Reiwa’s Double-E’s Beliefs】
Develop EA using sound methods,
and have many people support us,
maintain a long-lasting WIN-WIN relationship,
aim to revitalize the EA market and improve literacy.
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