DAY 14: Copy of strategic stop-loss and risk-reward setting conducted with EA

In the previous DAY 13, we emphasized the importance of money management in EA operation, conveying that prioritizing loss avoidance leads to long-term success.
Today, we will delve further into the core of that money managementthe combination of stop-loss settings and risk-reward (RR).
In EA, these can beexecuted programmatically and automatically, but how should we design them to be effective?greatly decreases.

Comparison with discretion—the unique advantages of EA

In discretionary trading, there are cases where a predetermined stop loss cannot be kept in practice, causing losses to expand.
However, if you clearly embed stop-loss settings in the EA,the risk of moving the stop loss due to emotions

• Strictly adhere to the set stop-loss width
  If you specify the rules in a program, the EA will execute stops according to those rules. The lack of hesitation and regret is a major strength.

• Enforce risk-reward ratios
  Unlike discretionary trading, you won’t cling to optimistic wishes like “I want to extend this further”; once the necessary conditions are met, take profits or cut losses mechanically.

Concrete approaches to stop-loss in EA

1. Fixed-width stop loss

   • A method that places a stop at a fixed number of pips or based on volatility.

   • Simple but hard to optimize when market conditions change. Regular review is effective.

2. Trailing stop

   • A method that automatically moves the stop-loss line upward as unrealized profits grow.

   • While you can aim for greater profits when the trend extends, if the setting width is narrow, it may exit early and reduce risk-reward.

3. Time cut

   • Some EAs shut positions under time-out if unrealized profits do not accrue after a certain period.

   • It avoids being tied to a stagnant market, but you may miss sudden breakouts.

Which stop-loss method suits EA depends greatly on the logic. What matters is to optimize while testing how changing stop-loss settings can secure expectancy.

Setting and validating risk-reward (RR)

Risk-reward ratio (RRR or RR)indicates how much profit you aim for relative to the stop-loss width.
Generally, strategies with higher win rates tend to have lower RR (for example, less than 1:1), while breakout or trend-following strategies may set a higher RR (1:2 or 1:3, etc.).

• Experiment with varying RR in backtests
  For example, try RR 1:1, 1:2, 1:3 and analyze how the equity curve and drawdown change.

• Balance win rate and RR
  Even with a 50% win rate, RR of 1:2 can yield a high expectancy, and with a win rate of 70–80%, even RR around 1:1 can accumulate profits.
  The optimal RR will vary depending on which market conditions the EA logic performs best in.

Mental stability brought by EA stop-loss and risk-reward

The major difference from discretionary trading is thatEA can maintain consistency from entry to exit according to rules.
By designing stop-loss and risk-reward appropriately, even after a losing streak you can think “It’s the logic’s fault, so no need to blame yourself,” reducing psychological swings.
Also, even after a streak of wins, if you calmly adhere to the settings, you can minimize regrets like “I was greedy and failed.”

Today’s summary and next time teaser

• EA stop-loss settings reduce emotional mistakes compared to discretionary trading,offering an advantagefor avoiding emotional errors

• By trying methods such as fixed stops, trailing stops, and time cuts that fit your logic, you can optimize expectancy

• By cleverly setting risk-reward (RR), you can aim for long-term profits while reducing drawdown anxiety

Next time (DAY 15) will be themed “EA Operation Environment—VPS and Network Stability” and will cover infrastructure aspects to keep EA running 24 hours. No matter how excellent the logic, if network troubles or PC issues cause it to stop, it defeats the purpose. Let’s examine the key points of a comfortable operation environment.

Introduction to the EAs I sell

If you are considering implementing an EA, please take a look at the EAs I sell.
https://www.gogojungle.co.jp/users/147322/products

An EA with flexible logic for stop-loss and risk-reward settings makes it easier to pursue parameters that suit you through backtesting.

In the next article, I will整理 infrastructure aspects such as VPS essential for stable operation of EA.
Be sure to press “Read more” to continue learning.