8/30【EA Beginner Course】What is a Grid Averaging Expert Advisor (Doubling/Multiple Lot EA)
FX Auto Trading, the EA developer Reiwa’s Double-E.
Starting this month, fitting for the title “EA Beginner Course,”
we will once again explain things from the very basics.
“From now on, not only FX but also starting EA operation!”
will be delivered to those who are seriously considering it.
【What is a Latent Averaging EA】
This time we will explain “What is a Latent Averaging EA.”
Basic mechanism of averaging
Averaging means that after entering a position on the first entry, if the market reverses, you add more positions to lower the average entry price.
If the market recovers even a little, you can close the position with overall unrealized profit.
There is also a derivative called “Martingale.”
For example,
First position: 0.01 lots
Second position: 0.02 lots
Third position: 0.04 lots
…and so on, by doubling the lot size to add entries, rapidly lowering the average cost.
Difference from other EAs
Difficult to build a portfolio with other EAs:
Averaging assumes multiple positions, making capital efficiency poor (in other words, requires a larger margin), and risk tends to accumulate.
Whether there is a stop loss setting varies:
A Latent Averaging EA without a stop loss has a particularly high “risk of ruin.”
Backtest tends to show an upward trend:
Since there is no stop loss, the backtest graph often looks like a clean, upward-sloping chart.
However, this also reflects a state of “always carrying unrealized losses.”
What happens when actually running it?
Premise is counter-trend:
Since averaging adds entries when the market moves against you, it will inevitablybe a counter-trend strategy.
Prone to drawdown:
Unless the market returns, you will continue to increase positions and endure drawdown.
High risk of ruin:
Leaving a Latent Averaging EA unattended to the full extent can exhaust funds and cause ruin, so handling (deciding when to run or stop) is essential.
Therefore, it is more suitable for experienced, advanced traders than beginners.
Notes and risk management
A Latent Averaging EA requires a large required margin, so capital efficiency is not good.
(Return on investment relative to the sum of required margin and maximum drawdown)
※ Guidance like “activate at this timing” or “pause now” from the seller counts as investment advice,
so it is important to obtain it from a company registered for investment advisory services.
※Priority is to avoid ruin through risk management, more than chasing profit.
Summary
・A Latent Averaging EA lowers average cost and aims to profit from market rebound
・It may look like a holy grail, but you will always carry unrealized losses
・Leaving it unattended is dangerous; capital management and run/stop decisions are essential
・Not beginner-friendly; an advanced EA
? “Backtests are perfect yet ruin in real trading”… many EAs of the averaging type fall into this.
That is why it is crucial to use them with a clear understanding of the risks.
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【Flow from starting EA to Intermediate Level】
First, it is important to master “installing EAs.”
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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※
Even then, at first many people struggle to understand everything at once.
I also stumbled many times at the beginning, so don’t rush—you’ll be okay!
If you have questions, there is a “Contact Us” form, so please use it!
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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 wonder, “I can’t find an EA that seems to win… I don’t want to lose…”
Therefore, Reiwa’s Double-E introduces a series of articles so you can assess using backtests to some extent.
Written as follows.
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■How to find a winning EA from backtests
https://www.gogojungle.co.jp/finance/navi/series/1714
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Forward testing is important, but
backtesting supports it.
Backtest duration is usually longer than forward testing,
whether you happen to win forward testing can be inferred by mastering backtest evaluation methods to some extent.
【How should EA risk management be handled?!】
And no matter how excellent an EA is,
if you neglect risk management, FX will ruin you.
So for EAs, how should risk management be approached?
The following articles answer this.
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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, for sustaining EA operation long-term, the “EA operation mindset” is also important.
Articles on that are:
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12/30 Year-End and New Year Special! EA Thorough Course Part 3
https://www.gogojungle.co.jp/finance/navi/articles/80551
8/12 [Obon Holiday Special!] Now you too can master EA! “Mindset for Improving EA Operation”
https://www.gogojungle.co.jp/finance/navi/articles/72829
8/17 [Obon Holiday Special!] Now you too can master EA! “Notes during EA operation”
https://www.gogojungle.co.jp/finance/navi/articles/73797
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With that said,
it's a substantial and quite important content, so even if you cannot understand it right away, please make sure to read through it!
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https://www.gogojungle.co.jp/users/112481/products
Specifically, I categorized Reiwa’s Double-E EAs by genre
https://www.gogojungle.co.jp/finance/navi/articles/67162
（Diversification by genre is essential when building a portfolio）
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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 computing EA risk management
https://www.gogojungle.co.jp/finance/navi/articles/64703
【Portfolio version】EA risk management calculations
https://www.gogojungle.co.jp/finance/navi/articles/65978
Tips to identify fraudulent 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 EAs
https://www.gogojungle.co.jp/finance/navi/articles/65619
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■How to find a winning EA from backtests
https://www.gogojungle.co.jp/finance/navi/series/1714
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https://www.gogojungle.co.jp/finance/navi/series/1701
Where is GoGoJungle’s inquiry form?
https://www.gogojungle.co.jp/finance/navi/articles/64723
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■Reiwa’s Double-E “Push Buyings and Retracements” release now公開!
https://www.gogojungle.co.jp/finance/navi/articles/65010
■Double-E FX Miscellaneous Talks
https://www.gogojungle.co.jp/finance/navi/series/610
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【Reiwa’s Double-E’s Belief】
