2/14★Sometimes I borrow the power of ChatGPT, part 24 - EA Beginner Course - Navi+ - GogoJungle | Auto Trading - Market Analysis

FX Automated Trading, EA developerReiwa’s Double-E here.

This serialized series, written with the aim of posting every day since last year.

Probably we’ve continued for almost a year now!

If you read what I’ve written so far,

I boast that you will surely get closer to better EA operation.

And, since I’d like to take a short break,

I’ll continue posting with the help of ChatGPT.

From time to time, I will post irregularly like before.

Explanation of Lot Size at EA Purchase and Drawdown

Hello, I’m the EA developer Reiwa’s Double-E.

This time, based on answers to a customer’s question about the calculation method for lot size and drawdown when considering purchasing an EA, I’d like to discuss points to consider when purchasing and operating an EA.

EA risk management is a very important point, and if you do not understand it, it may lead to unforeseen losses.

The customer’s question was as follows:

【Customer】

「I’m considering purchasing. What is the lot size per 100,000 yen? What is the maximum drawdown percentage? Please answer。」

Points of Answer

First, the calculation method for lot size and maximum drawdown is inferred from past backtests.

As follows, add necessary margin and maximum drawdown to calculate an appropriate lot size relative to available funds.

1. Required Margin per Unit Lot

For example, when trading AUD/CAD, the required margin is calculated as follows.

Assume AUD/JPY rate is 100 yen and you trade 0.1 lot (10,000 units) with leverage 25x,

100 yen × 10,000 ÷ 25 = 40,000 yen

This is the result.

2. Maximum Drawdown

Next, calculate maximum drawdown from backtest results. For example, if the past maximum drawdown is 60,000 yen, add it to the above required margin.

40,000 yen (required margin) + 60,000 yen (maximum drawdown) = 100,000 yen

This is the minimum funds required for operating at 0.1 lot per 100,000 yen.

3. Drawdown Percentage

Next, calculate what percentage the maximum drawdown is. If funds are 100,000 yen and maximum drawdown is 60,000 yen, drawdown rate is:

60,000 ÷ 100,000 × 100 = 60%

This may be viewed as a very large drawdown by many. Therefore, it is important to adjust lot size according to the acceptable risk.

4. Example of Adjusting Lot Size

You can reduce lot size according to the acceptable risk and recalculate. For example,

0.05 lot yields a maximum drawdown of 30,000 yen and a drawdown rate of 30%.

0.01 lot yields a maximum drawdown of 6,000 yen and a drawdown rate of 6%.

Thus, to suppress risk, reduce lot size to lessen drawdown. This is a basic principle of money management and a very important part of EA operation.

Convenience of Calculating by the User Itself

This calculation method is very convenient when operating an EA. It is a technique that appears in Larry Williams’ writings and helps correctly grasp risks for each EA.

Understanding how much risk you can tolerate relative to your operating funds and trading with a risk-appropriate lot size is the key to long-term stable operation. Please apply the same calculation method to other EAs and manage risk while trading.

How does this sound? Risk management and lot size adjustment are very important points in EA operation. To profit with EAs, you must properly understand and manage risk.

Please use this method to assist your future trades!

Now, please continue to have a good trading life!

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【Flow from Starting an EA to Intermediate Level】

First, mastering how to install an EA is important.

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MT4 EA (Expert Advisor) and Indicator Installation Procedures

https://www.gogojungle.co.jp/post/1/8212

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※GoGoJungle Video Version※

At first, you may not understand everything at once, and some may stumble.

I also stumbled many times at first, so don’t rush—take your time!

If you don’t understand something, there is a contact form, so please use it!

https://www.gogojungle.co.jp/inquiry

【How to Choose an EA】

Now that you feel you can operate an EA,

you may think, “I don’t know which EA will win… I don’t want to lose…”

Therefore, Reiwa’s Double-E provides articles such that you can judge up to a point by backtesting,

and the following articles were serialized.

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■ How to Find Winning EAs from Backtests

https://www.gogojungle.co.jp/finance/navi/series/1714

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Forward testing is important, but

backtests support it. Usually, the backtest period is longer than the forward period, and

whether you happened to win in forward testing can be gauged to some extent by mastering backtest evaluation methods.

【How should EA risk management be done?!】

And no matter how excellent an EA seems,

if you neglect risk management, FX will collapse.

So for EAs, how should risk management be done?!

The article answering this is below.

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■ “How to Calculate EA Risk Management”

https://www.gogojungle.co.jp/finance/navi/articles/64703

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【EA Operation Mindset is Also Important】

And, to continue EA operation for a long time, an “EA operation mindset” is also important.

Regarding those articles,

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12/30★ Year-end and New Year SP!! EA Full Explanation Course Part 3

https://www.gogojungle.co.jp/finance/navi/articles/80551

8/12【Obon Holiday Special!】 Now You’re an EA Master! “EA Operation Mindset Improvement”

https://www.gogojungle.co.jp/finance/navi/articles/72829

8/17【Obon Holiday Special!】 Now You’re an EA Master! “Notes 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 important,

so even if you can’t understand it right away, please be sure to skim through it!

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【Reiwa’s Double-E EA Product List】

https://www.gogojungle.co.jp/users/112481/products

Specifically categorized Reiwa’s Double-E EA by Genre

https://www.gogojungle.co.jp/finance/navi/articles/67162

(Portfolio diversification by genre is essential)

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【Reiwa’s Double-E Series Articles】

■ EA Beginner Course

https://www.gogojungle.co.jp/finance/navi/series/1700

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About “How to Calculate EA Risk Management”

https://www.gogojungle.co.jp/finance/navi/articles/64703

https://www.gogojungle.co.jp/finance/navi/articles/65978

Simple tips to spot bad products (in the case of EAs)

https://www.gogojungle.co.jp/finance/navi/articles/64738

Where to check first when you don’t understand something about EA

https://www.gogojungle.co.jp/finance/navi/articles/65619

■ How to Find Winning EAs from Backtests

https://www.gogojungle.co.jp/finance/navi/series/1714

https://www.gogojungle.co.jp/finance/navi/series/1701

https://www.gogojungle.co.jp/finance/navi/articles/64723

▼ Reiwa’s Double-E “Buy on Dips / Sell on Rallies” Open Release!!

https://www.gogojungle.co.jp/finance/navi/articles/65010

https://www.gogojungle.co.jp/finance/navi/series/610

【Reiwa’s Double-E’s Beliefs】

Develop EA by solid methods,

and gain the trust of more people,

maintain a long-lasting WIN-WIN relationship,

and contribute to revitalizing the EA market and improving literacy.

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