Forward Test results - Lot sizes

[lkm020]

Hi,

Looking over the forward test results I noticed a few things that are puzzling me:

1. The lot sizes for the GBPCHF trades are almost always much smaller than for the other pairs. With the max stop loss being 100 for all the pairs, this means the % risk for the GBPCHF trades are on average half that of other pairs. Why?
Looking at the web calculators for $/pip for each pair (see below table), there appears to be no reason for this. If anything, the EURGBP pair lot sizes have more reason to be smaller (they are slightly smaller, but not by much). All the pairs apart from GBPCHF have average lot sizes (over the whole period from 18/5/10 to 3/5/11) that are very close to each other. If the GBPCHF lot sizes averaged about the same as the other pairs, then its performance would be a lot better.

$/pip for 1 standard lot
EURGBP 16.46
EURCHF 11.54
GBPCHF 11.54
USDCAD 10.37
USDCHF 11.54
EURUSD 10.00
EURCAD 10.37


2. In early December last year the lot sizes for the trades suddenly dropped significantly and stayed much lower until March this year. Why was that?

Thanks
Kevin

[Support_AdrianS]

Dear Kevin,

1. That is because the GBPCHF pair has the greatest drawdown of all currencies on our 10 years back tests.
As we said on our Forum at Info & Support on Some useful advice Topic, set the risk dependant on how willing you are to loose and not how much you would like to earn. Loss is part of the trading and cannot be avoided.
In this way we have equalized all the possible losses, for all currencies.

2. That is because we traded two hours during the winter and we used two separate charts for each currency. To avoid duplication of losses, we halved the risk.
We used two separate charts for each currency instead of one chart with the normal risk because diversification is the safest method of investment.

All our decisions are taken based on potential losses because this is a robot that wins more than it loses but loss is part of the trading and cannot be avoided.

Thank you for your very good questions and for your interest.

Kind regards,
ForexRealProfitEA Team.

[lkm020]

Hi,

1. So it seems there is a different method used to calculate the lot size for each pair. Can you provide the method for calculating lot size?
Normally the lot size traded would be based on:
a) the account size / free margin at the time of the trade,
b) the $ per pip for the pair, and
c) the stop loss.

Clearly you are bringing an additional factor into play to calculate the lot size for the GBPCHF pair. What is that?

Thanks

Kevin

[Support_AdrianS]

Dear Kevin,

Money management is a system that automatically calculates the size of the open positions according to the account’s balance.
Our recommendation is to set MoneyManagement on “true” because it produces more consistent profits

MM_Option calculates the risk according to Account Balance, Account Equity or Account Free Margin. Its settings are as follows:
1 – Account Balance
2 – Account Equity
3 – Account Free Margin
Default MM_Option is 1 (risk calculated based on the account’s balance).
This option is very useful in choosing between conservatory and aggressive risk strategy or when using multiple expert advisors on the same account.

Risk percent calculates the size of the next open position according to the stop loss value.
This value defines the maximum amount of money (in percentage) of your current Account Balance, Account Equity or Account Free Margin (depending on MM_Option) that you can loose on a single trade for a certain pair when the stop loss is hit.
Example given:
- Risk percent=5 and Set_StopLoss=100; ForexRealProfitEA will loose 5% of the money if 100 pips stop loss is hit;
- Risk percent=8.5 and Set_StopLoss=50; ForexRealProfitEA will loose 8.5% of the money if 50 pips stop loss is hit.

Kind regards,
ForexRealProfitEA Team.

[support_CataH]

Hi Kevin,

The answer is very simple. There is no other additional factor for the GBPCHF pair. We use a risk of 3% for GBPCHF compared with 6% for the rest of the pairs. That's all. This way an eventual drawdown caused by this pair (which historically is bigger that for other pairs) will be half as much. Of course if you are ready to accept bigger dradowns you can set the risk to 6% for the GBPCHF too, and in the long run the profits will be bigger.

Regards,
Catalin
ForexRealProfitEA Team.

[support_CataH]

OOPS! Double answer, but different aproaches to the questions

[lkm020]

"We use a risk of 3% for GBPCHF compared with 6% for the rest of the pairs."

This was the info I needed. So due to the higher drawdown in the backtests for GBPCHF compared to the other pairs you are using a lower risk %. Fine.

Thanks
Kevin