EA craftsman's EA Course 【016】 Dream of完全な passive income! True risk diversification and portfolio

From Discretion to Automated Trading

I think not many people who are about to start FX will jump straight into automated trading from the beginning.

In other words, many of those interested in MT4 or MT5 EAs are not beginners, but traders who have already gained a certain level of experience through discretionary trading or other activities.

So why do traders who have traded manually until now begin to take an interest in automated trading such as EAs?

Everyone’s situation is different, but for example, someone who tends to be easily swayed by ups and downs, gets upset or discouraged when they lose and gets carried away when they win, and then messes up on the next trade…


I want to break this spiral…

While struggling with this, some people may hear that “automated trading can eliminate the mental factors involved!” and become interested… perhaps?

Or for someone like me, for diversification of riskcontinue to use discretionary trading while running automated trading in parallelas a research topic.

Advocating Parallel Operation

Then why does running discretion and automated trading in parallel contribute to risk diversification?

Because the ways to earn are completely different. They are completely different in every respect.

In discretionary trading, you integrate not only technical factors but also market sentiment, geopolitics, and so-called fundamental elements, and by gaining experience and honing trading skills you can capture the atmosphere of the market that is difficult to explain in words and improve performance.


On the other hand, automated trading cannot polish your skills or understand geopolitics or capture the atmosphere like discretionary trading… butthe biggest advantage is that you never miss a chance.

Since it works 24 hours without complaint, it continuously monitors the market while you sleep and trades according to the rules.

Conversely, there is a rigidity in that it does nothing for opportunities outside the rules.

Thus each has its own merits and demerits, so the greatest advantage of running discretion and automated trading in parallel is to fill in each other's weaknesses… I think this is the biggest benefit.

My wife and I have completely different tastes, personalities, values, ways of thinking, and life experiences, but we work well together by complementing each other’s weak points and unfavorable areas.

Back to the main topic, regarding discretion, not only short-term day trading but also swing trading and medium-to-long-term trading can be run in parallel to stabilize performance.

Types of EAs

And since this article is an EA course, we must also talk about risk diversification related to EAs.

As you know, there are various logics behind EAs. There are as many as there are stars in the sky.

Even as an EA developer myself, I have developed over 2,000 EAs.


However, I did not develop 2,000 distinct logics; some are similar logics with slight variations in time frame, currency pair, or parameters, so categorized they reduce to about 200 types.

Those 200 types have different logics, but when actually deployed, some end up delivering similar performance and earning methods.

For example, if they share similar favorable market environments or drawdown timings, it makes sense.

True Risk Diversification

What this means is that it reflects my own quirks as a developer. The quirks of EA development.

Discretionary trading also has quirks from trader to trader, but automated trading programs also exhibit quirks.

For example, favorite methods, commonly used indicators and their combinations, etc…


At first, you might say, “New method, I’ve got a great idea!” and build a completely new logic, but while backtesting and adjusting, you may eventually…

wonder, is there something similar from before…

and realize it later on.

So if you truly intend to diversify risk…

use programs from multiple EA developers

rather than building a portfolio only with EAs from the same developer…

As you continue, if you find a favorite EA developer, you might add a bit more of that developer’s EAs into your portfolio…

EA Operators are Fund Managers

EA operators are the same as fund managers.

You interview EAs as if they were traders, decide whether to hire them, actually hire them, and if performance is poor you replace them with another EA (trader)…


Give better-performing ones more work… for example increase position sizes or add more EAs from the same developer…

This is the job of an EA operator. It’s all about management itself.

The Dream of Complete Passivity

I somehow obtained a promising EA! I plug it into MT4/MT5… yes! a smiley face appears!… and then just leave it alone!


That’s not how it works.

Making Money = Professionalism

Usually you can leave it alone, but at least once a week, for example on weekends, you need to analyze the results with your own eyes.

Are you earning as expected? Are there any errors shown? If there is drawdown, is it within expectations? Do you find any oddities when cross-checking with backtests? etc…

Is it bothersome?


But perhaps, isn’t it easier than commuting to a company by bus or train through rain or wind, working from morning to night?

In the end, this too becomes a matter of getting used to it. The company is tough at first, but as you get used to it you learn to slack a little, and it becomes easier, unless it’s a true black company.

So even if managing EAs feels tedious at first, as you go, you’ll get the hang of it, and you’ll proudly become an EA fund manager. It’s not about whether you can or cannot do it… it’s about whether you will or won’t do it.

Surely there isn’t anyone who thinks, “It’s impossible to check EA performance even once a week!”

Even such a simple thing, those who take the first step are a minority. If you understand the subconscious as described on my blog, you can easily overcome it.

But because the majority does not act, we can succeed, so I would be grateful if the public continues not to act in the same way.

■ My Developed EAs: Concepts and Operational Policy

EA Craftsman’s EAs (Three Arrows) are here