To Autotrade or Not To Autotrade? Always a Great Question

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To Autotrade or Not To Autotrade? That is the question many currency traders have. Should we focus on manual trading or automated trading? Or maybe somewhere in between?

There are a lot of quite well known traders that are very anti-robot and do not like the idea of automated trading at all. I do understand all those people who are anti-robot, those who are against any automated trading or anything related with robots and currency trading. In any market, any niche, every area of our lives there will be people who agree or disagree with certain things. I highly respect their opinion to not trust trading robots, but let me share my opinion about automated trading. Let me tell you how I see this as a programmer with 16 years of experience.

First I would say that I totally agree that Autotrading can be a complete mess. I mean, just look at these examples below. What you see here are several blown accounts in a short period of time. And if there were clients who were copying those trading signals they have probably lost their accounts too. These trading robots were giving quite good and profitable results over the past weeks or months, but then suddenly they lost everything in a day or so. It’s not just the money you lose. You lose your precious time as well.

And always remember that even the best trading strategy or trading robot can fail at any time even if it was profitable in the past. This happened too many times before. You can read my other story about how this trading robot with perfect trading record failed to make money after it became available to public.

This strategy was profitable for 3 months and then lost everything in a single day.

Ezpip trading strategy results

Ezpip trading strategy results

This strategy was profitable for 14 months. It’s more than a year. And then at the end of July this year it started to go into a drawdown more and more and more until about 5 weeks later it lost almost all the money in the account.

FXamplified trading strategy results

FXamplified trading strategy results

What about this one? It was profitable for about one month and then lost all funds in a week.

ErocFXservices trading strategy results

ErocFXservices trading strategy results

This one. Profitable for about 9 months and then lost everything in 3 months.

TotalGridAUDNZD trading strategy results

TotalGridAUDNZD trading strategy results

I am sure anyone would get angry and frustrated to see this happening to their trading account. So does this mean that Autotrading is stupid and not possible? I would not say so. After all I am the one who is using automated trading system on my our real money account too and I even managed to double my money in 12 months before. When it comes to Human trader versus Trading robot, each side has its own pros and cons.

Before we state that automated trading is a stupid thing to do, lets look at it more closer. What is Autotrading? Can we state that Autotrading is a martingale trading style? Can we say that a grid trading style is Autotrading? Can we say that scalping is Autotrading? Obviously we cannot say anything at this point yet from just knowing what trading style is used. What’s important is how you are trading the markets. Are you trading them manually or automatically?

So when we see an automated trading robot blowing an account by using grid or martingale trading style, does this mean it was robot’s fault? Well it kind of is robot’s fault, because he did the trading. But let me ask it this way. If you were using the same martingale grid strategy to trade manually, would you lose that account in the same way? Obviously you would lose it, if you were using the same strategy with the same trading rules. So what I am trying to say is that the trading strategy is what makes you to blow an account. You or the robot is just a “person” responsible for executing that strategy.

The fact that all these grid, martingale and scalping strategies are so difficult to use in manual trading, makes them to be used more frequently in trading robots. Also, you cannot back test trading strategy manually using the history prices of the last 10 years. This is only possible with a trading robot and this is where many programmers turn to. They would rather spend several days or weeks creating a trading EA to backtest a strategy, than spend months doing a manual backtest. If you have a trading robot you can backtest the same strategy over and over again on different pairs, time frames, use different settings.

So these days, when creating a trading robot is so easy for any programmer, there is no doubt anyone can built it. There are even services that allows you to create trading robots without the need to know anything about programming. This means you do not need to know MQL programming language or anything about it. Even 13 year olds can create a trading robot these days.

Here are two apps/services that allow you to create MT4 EA’s without programming. Note that I am not an affiliate for these websites. I did not tested them myself.

So what I am trying to say, is that the trading strategy is what’s important here and also the quality of a trading robot code, it’s ability to follow those trading rules. What if you take a trading strategy that top Forex traders like Jarratt Davis are using and create an automated trading robot out of that? Will this look the same stupid as some grid trading strategy you found on a forum? Do you think such trading robot would be able to blow an account in 10 trades?

Even though it is close to impossible to automate Jarratt’s trading strategy, because it requires you to do a fundamental analysis, there is a possibility to make it a semi-automated strategy. The same applies almost to any trading strategy out there. Imagine if you had a special trading robot where you can set to only go LONG or SHORT according to the sentiments of the markets or fundamental analysis. This would save your trading robot from lots of bad entries in the wrong direction.

Such trading robot would become your employee who never asks to pay the salary and never needs to go for lunch or go to sleep. I have created a video tutorial how to trade the markets in a semi-automated way using one of my tools.

Maybe your trading strategy is just a collection of some simple entry rules using a basic indicator that never seems to work well. But what if after the right fundamental analysis you know that the GBP price will be going down for the next two weeks? You could just switch your trading robot to a “SELL ONLY” mode and I am sure this alone would make it get into less losing trades. So in this way your trading robot is still fully automated, you just need to set the main direction for it to follow for the next several days, weeks or months. Does this make more sense than just simply trusting on some grid trading strategy or betting your money all-in style with some martingale strategy?

I hardly believe that there is anyone in the world trusting millions of dollars to some trading robot bought online from some website. You should be very rich and risk-driven person to take a million dollars, put that into a MT4 account and attach a $99 dollar trading robot on the chart. The risk goes up 100x times if that trading robot will be using martingale or grid trading system. At this point I would just call it a stupid investment.

But if you know that the trading robot used on your trading account is following some conservative and trusted trading strategy I bet you will feel more comfortable with your investment. So at this point, don’t you think that Automated trading is a reality if executed well?

Personally I do not trust these trading robots that use grid or some other funny trading methods. But I know there are thousands of people who are looking for such robots. Because there is a huge demand for such product there will always be people who create them.

When I was creating trading robots for my clients earlier, I got loads of requests to create such Expert Advisors. People want easy money and they are looking for any shortcut to this.

So how do you find out if some automated trading strategy is worth using or not.

Personally I would first check trading results on Myfxbook. If I see anything funny, like a lot of information hidden from the public, every lot size is a doubled value of a previous one, there are no stop loss levels used on the trades, I would not even bother to test such trading system.

Another great way to find out if a trading strategy is risky or not is to check “Risk of Ruin” statistics on Myfxbook. For grid type trading systems these numbers are usually something like “99.99% chance to lose 100% of the account in 5 trades“. Would you trust your money to such trading system? With just 5 trades it can lose all your account and there is a 99.99% chance that this will happen. How can anyone trust their money to that? I think people who invest real money with such trading systems do not understand what that is or they have never seen these numbers before.

Let’s take a look at a few trading systems. Some of them have a very bad “Risk of Ruin” statistics.

FXamplified strategy Risk Of Ruin Stats

FXamplified strategy Risk Of Ruin Stats

99.99% chance to blow your whole account in 8 trades.

ErocFXservices strategy Risk Of Ruin Stats

ErocFXservices strategy Risk Of Ruin Stats

99.99% chance to blow your whole account in 25 trades.

TotalGridAUDNZD strategy Risk Of Ruin Stats

TotalGridAUDNZD strategy Risk Of Ruin Stats

99.99% chance to blow your whole account in 1 trades.

How crazy is that? I know these are only predictions, but they still mean something, don’t they?

Now if you look at a system that have been profitable for years and is fully automated system you would get completely different numbers.
For example check out Wallstreet robot stats.

Wallstreet Robot Risk Of Ruin Stats

Wallstreet Robot Risk Of Ruin Stats

It says there is a chance of 0.01% of losing 100% account in 154 consecutive losing trades. 0.01%? Is that even a chance?
I am no affiliate for Wallstreet robot and I am certainly not trying to sell it. I just used it as an example as it is the one that sits on the list of top trading systems on Myfxbook for quite a long time.

I have checked my Daily-F trading system stats too. It says there is a chance of 0.01% of losing 100% account in 90 consecutive losing trades. Not that good as Wallstreet robot, but still I think this number gives a lot of confidence to use such trading strategy, even when it is not performing very well for the last several months.

Daily-F strategy Risk Of Ruin Stats

Daily-F strategy Risk Of Ruin Stats

Conclusion

It does not matter if you are against automated trading or not. What matters is how much profit you are making and how much risk is involved. If you risk $10 to earn a $100 – you are doing it right. If you risk $100 to earn $10 dollars – you are doing it wrong.

Next time you say that Autotrading is a complete nonsense make sure you check what trading rules are used exactly. It might be that you are dealing with some serious trading strategy.

Please post your questions and comments below. I will be delighted if you share this video with someone who needs to see it today.

About the author

Rimantas Petrauskas

First I am a father, a husband and then the author of the book “How to Start Your Own Forex Signals Service”. I am also a Forex trader, a programmer, an entrepreneur, and the founder of ea-coder.com Forex blog. I have created two of the most popular trade copiers and other trading tools for MT4 that are already used world wide by hundreds of currency traders.

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