How to trade forex robots – Zamolxis case study

Today, Zamolxis robustness was tested, so was the patience of my customers. Obviously, what I’m going to say applies to many of forex traders, not only to my customers: when they bought Zamolxis, it was winning, 5 months without a single losing month. In spite of backtests, documentation and statistics which clearly show a potential ~25% drawdown and 7 losses in a row for a single pair, they continued to believe that this won’t happen. As expected, it did happen for the best performing pair: EURUSD

Most of my customers panicked and stopped trading (the average behavior of the average trader who always loses). Some of them lowered the lot size (a wise decision I’m going to explain later in this article). Some of them decided from the very beginning to reduce the risk by manipulating the default settings (another wise decision).

But before going further, I have to apologize for one mistake I made in the documentation. I’m not at home to fix it right now, but I will. Before Zamolxis official release, I had  so many test versions with so many tweaks and I simply forgot which is the official version and which is the test one. Sorry for that. Most of my customers asked me how Zamolxis increments the lot size after each loss.

Here it is:

For EURUSD, AUDUSD and USDJPY, the lot progression is (assuming that recovery_step=3, recovery_factor=2, lot=0.1):

0.1, 0.1, 0.1, 0.2, 0.4, 0.8, 1.6, 2.4

If the 8th trade (lot = 2.4) is lost, then the EA should be reoptimized or the cycle should start from 0.1

For GBPUSD, the lot progression is:
(assuming that recovery_step=2, recovery_factor=2, lot=0.1):

0.1, 0.1, 0.2, 0.4, 0.8, 0.8, 1.2, 2

If the 7th trade (lot = 2) is lost, then the EA should be reoptimized or the cycle should start from 0.1

Sorry for the mistake, now I hope everything is crystal clear. I will fix the documentation once I came back from my summer vacation.

Now, let’s continue:

Rule no. 1
If a certain drawdown is to be expected, it will definitely happen. In spite of all your beliefs, hopes and dreams, it will happen! Or worse. Please consider that backtests are only an ideal representation of reality. Reality is much worse.

Rule no. 2
Every strategy will eventually fail on the long run! None survives the market! The market is changing and it is always one step ahead! When you start trading using any expert advisor, please consider this universal truth.

Rule no. 3
Any EA works for a certain period of time, for a certain market condition (trending, ranging, choppy) and stops working when market conditions are not favorable for that specific strategy.

Rule no. 4
Sometimes is better to use the default settings, but most of the time is much better to make the EA trade your way. After all, it should be your decision.

Zamolxis is a great robot, if properly used! It has ALL required settings to make it trade your way.

1. If you don’t want to increment the lot size at all, just set recovery_factor=1

2. If you want to give it more space before incrementing the lot size, you could always set recovery_step to a higher value. For example you could set it to 4 for GBPUSD and to 6 for EURUSD. This way, the lot size won’t start incrementing until 4 and respectively 6 trades in a row are lost. Then, it is safely to assume that at a certain point during the incrementation phase, one trade will be won. The drawdown is reduced by much.

3. You can play with recovery_step and recovery_factor any way you want. Or, you can decrease the initial lot size.

4. You could use a cent or a micro account  and have a greater control of your minimum lot increment value and initial lot size.

5. You could use trades and pips parameters in a large number of combinations. For example if you set pips = 0 and trades = 10 if means that the lot size won’t get incremented if the number of pips after 10 trades is greater than 0. If you want to play much safer, set pips to a negative value, let’s say – 150. It means that the lot size won’t get incremented if the number of pips after 10 trades is greater than -150. Please note that the last trades (default=10) and pips (default=150) are counted for ALL pairs / currencies, not for a single pair / currency! That’s why I called this feature “cross currency trading”.

The possibilities are endless, it’s up to you, you don’t have to rely only on default parameters!

If you find this article useful, please share! 🙂

 

Have a nice trading week!

Dave and Paul