4/13 (Sat) Short-term perspective drawbacks
EA developer Reiwa no Double-E is here.
Yesterday, bad product sellers and EA beginners
who want to earn big money right now
connected from the same short-term perspective,
resulting in aligned interests,
and talked about how they can be easy to fool.
Today, I will discuss other harms of a short-term mindset.
【Being too stubborn about one single trade】
Short-term mindset means
when you want to earn a lot right away,
there is a tendency to risk too much on lots.
In a long backtest from the past,
the sum of “maximum drawdown per lot” and the “required margin for total lots”
is the minimum necessary capital, but
mentally and emotionally,
when you trade with a lot size relative to that capital and enter,
you feel jittery and worried,
or you want to manually exit,
meaning you are risking too much on the capital for the lot size.
You should reduce the lot size.
I think an appropriate stake that the trader can ignore would be better.
And you might even forget that it is running
and then realize your capital has grown.
That might be an ideal state somewhere.
In the first place, EAs win when they should, and lose when they should,
and aim to be profitable in the long run.
However, positions that make you jittery or want manual exits
are due to an inappropriate lot ratio,
causing you to force a win too strongly.
you must win no matter what!
【If that happens…】
Then what becomes noticeable is
the inevitable discrepancy between accounts that any commercial EA will encounter.
On Account A you won,
but on Account B you had losing trades,
the forward on the sales page showed wins, but
the account in hand showed losses.
Generally, with EAs,
differences inevitably arise due to different delivery rates.
Even in backtests,
even with multiple tick data claimed to be highly reliable,
they do not yield exactly the same results.
Differences can occur even at the backtest stage.
So which account is appropriate? There is no single right one; each account has different delivery rates,
and over the long term, performance differences tend to converge.
(However, EA that keeps losing on a downward slope will lose on any account.)
If differences arise per account,
they are usually trades that were bound to lose,
and there are many cases where one account could take profit due to a narrow spread.
However, if you are over-clinging to one trade,
the account-to-account differences will anyway be concerning.
Yet, the internal program code of the EA remains unchanged during operation or when switching accounts,
in other words, the EA does not change,
even if the account’s delivery rate or environment changes,
which makes adapting to Account A without breaking Account B very difficult.
It is extremely hard to modify in this area.
I recall a different EA developer once trying to make entries and exits looser so that discrepancies across accounts would be reduced,
but making it easier to enter trades too much increased the distance to losses and worsened performance,
and as expected, that person’s EA fell into a slump and caused controversy.
As for Rei wa no Double-E's EA,
with a long-term perspective,
we have developed it to the point where we cannot further refine it, and have released it
so it becomes even more difficult to modify in such cases.
So this article covered the harmful effects of a short-term mindset.
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【Reiwa no Double-E EA Listing】
https://www.gogojungle.co.jp/users/112481/products
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【Reiwa no Double-E series articles】
https://www.gogojungle.co.jp/finance/navi/series/1700
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https://www.gogojungle.co.jp/finance/navi/articles/64703
https://www.gogojungle.co.jp/finance/navi/articles/64738
https://www.gogojungle.co.jp/finance/navi/series/1701
https://www.gogojungle.co.jp/finance/navi/articles/64723
https://www.gogojungle.co.jp/finance/navi/series/610
【Reiwa no Double-E’s beliefs】
