3/18★Sometimes I borrow the power of ChatGPT, its 48
FX Automated Trading, the EA developerReiwa Double-Ehere.
This series has been written aiming for daily posts since last year.
Probably we have continued for almost a year now!
If you read what I have written so far,
you will surely be closer to better EA operation, I am confident.
And, since I want to take a short break,
I will continue posting with the help of ChatGPT.
Occasionally, I will post irregularly as in the past posts.
The dangers of chasing only annualized returns
Hello, I am Reiwa Double-E, the FX automated trading EA developer.
This time, **“The danger of chasing only high annual returns”** I would like to discuss.
Beware gaudy slogans!
First, there are many catchphrases in the world that stir up gambling impulse.
For example, **“Even 100% monthly returns are possible!”** such dreamlike claims are everywhere.
But think about it.
Saying that 100% monthly returns are possible means aiming for explosive profits in a short period, but conversely, you must not forget that -100% in a month is also possible.
In other words, once you incur a large loss, the risk of depleting funds becomes high.
Actually, an EA that achieves 100% monthly return at its peak is likely to fail in other months. Even with repeated deposits, the same results tend to occur.
EA chasing only short-term gains often becomes unusable within a few months due to changes in the market environment.
Chasing only annual returns is dangerous
“Then isn’t it better to use annual return as a benchmark rather than monthly?” some may say, but relying solely on annual return is also dangerous.
For example, hearing “100% annual return” might feel very attractive.
But if you don’t look at the path to that annual return, there is a risk of failure.
Example 1: yield went to -10% but annual was 100%
Example 2: yield went to -50% but annual was 100%
In both cases, the final annual return is 100%.
However, if your capital cannot endure a -50% drawdown, you would fail halfway and never reach 100% for the year.
Therefore, judging by annual return alone is dangerous.
What matters is the balance between “net profit” and “maximum drawdown.”
So, how can you safely choose an EA?
The most important thing is to clearly look at the balance between “net profit” and “maximum drawdown.”
Net profit: total profit as a result of operation.
Maximum drawdown: the largest drop in assets during the trading period.
An EA with large net profit and small maximum drawdown has a higher chance of big gains with less capital. It allows minimizing risk while aiming for long-term asset growth.
Furthermore, an EA that yields steady profits every year has less annual return skew, enabling more stable operation.
Choosing EAs and building a portfolio
Finally, when selecting EAs or building a portfolio, please be mindful of the balance between net profit and maximum drawdown. This helps suppress risk and enables stable asset management.
Do not chase annual returns alone; manage risk properly and operate with a long-term perspective.
Please try to apply this perspective when selecting EAs as well!
With that, I hope you have a good trading life!
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【EA Start to Intermediate Flow Summary】
First, it is important to “master installing EAs”.
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MT4 EA (Expert Advisor) and Indicator installation procedure
https://www.gogojungle.co.jp/post/1/8212
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※GogoJungle Video Version※
At first, not everything can be understood at once, and some will stumble, perhaps many will.
I also stumbled many times at first, so don't rush—it's okay!
If you have questions, use the “Contact Us form”!
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■ GoGoJungle“Contact Form”
https://www.gogojungle.co.jp/inquiry
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【How to Choose an EA】
Now that you think you can operate an EA,
you might think, “I don’t know which EA will win… I don’t want to lose…”
So Reiwa's Double-E goes on to say,
“To some extent, you can judge by backtesting,”
and has serialized the following articles.
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https://www.gogojungle.co.jp/finance/navi/series/1714
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【EA risk management, how to do it!?】
And, no matter how excellent an EA you obtain,
FX will collapse if risk management is neglected.
So for EA,how should risk management be done?
This is answered in the following article.
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■ About calculating EA risk management
https://www.gogojungle.co.jp/finance/navi/articles/64703
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【EA operation mindset is also important】
And, to sustain EA operation long-term, the “EA operation mindset” is also important.
These articles are:
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12/30 End-of-year Special!! All-About-EA Lecture Part 3
https://www.gogojungle.co.jp/finance/navi/articles/80551
8/12 [Obon Holiday Special Plan!] Become an EA Master! “Mindset to Improve EA Operation”
https://www.gogojungle.co.jp/finance/navi/articles/72829
8/17 [Obon Holiday Special Plan!] Become an EA Master! “Cautions During EA Operation”
https://www.gogojungle.co.jp/finance/navi/articles/73797
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So,
the content is substantial and quite important,
even if you cannot understand it immediately, please make sure to read it!
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【Reiwa Double-E EA Listing】
https://www.gogojungle.co.jp/users/112481/products
Specifically categorized Reiwa Double-E EAs by genre
https://www.gogojungle.co.jp/finance/navi/articles/67162
(Genre diversification is essential when building a portfolio)
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【Reiwa Double-E Series Articles】
https://www.gogojungle.co.jp/finance/navi/series/1700
https://www.gogojungle.co.jp/finance/navi/articles/64703
https://www.gogojungle.co.jp/finance/navi/articles/65978
https://www.gogojungle.co.jp/finance/navi/articles/64738
https://www.gogojungle.co.jp/finance/navi/articles/65619
■ How to find winning EA 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
https://www.gogojungle.co.jp/finance/navi/articles/65010
https://www.gogojungle.co.jp/finance/navi/series/610
【Reiwa Double-E’s Belief】
Develop EA with integrity,
and have more people patronize us,
to maintain a long-lasting WIN-WIN relationship,
aim to revitalize the EA market and raise literacy.
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