limit DD protection

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Francisco 123321
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backtest


Backtest CP v. 2.25 ,default settings,  Lot size (fixed/per 1000=0.02), on 5M chart of all 2020 wiht IC Markets  Leverage 1:500,  4.000.-€ initial deposit. It took a few days to complete. Very good results but note 4 big decreasing DD in the chart . First one of 81,39%. The proposal is to implement a kind of security protection of maximum DD with an option to auto hedge 5 martingale current opened positions when Equity < 50%-60%.  EA would check a trend filter like  MA50 or smoothed Heiken Ashi filter of bigger TF (1H - 4 H) and when price bar crossover the trend filter close the hedged and restart nomal functionality. It is obvious that when big DD occours its becouse there is a long trend in place as seen in the chart below and somehow it could be put undercontrol using trend filter of bigger TF. It would be worhwhile despite of having worse overall results and even if it makes small losses  sometimes, as a kind of account protetion insurance. 


Image 672

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Andrey Khatimlianskyi
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It looks like idea, so I moved topic to the Suggestions forum.

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Andrey Khatimlianskyi

I'm not sure about "it makes small losses sometimes".

Losses can be very significant.


Please, check other cases with 5 opened trades (without such big DD reached) and try to summarize losses from these hedges.

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Francisco 123321

Hello Andrey. Nice too see you again. Congratulations for your project. It's very interesting.  

There will be many cases with 5 opened trades but not many cases with 5 opened trades and a current DD of - 65% or more. At least in my bactest of 2020 only one time  occoured (the 1º DD=81,39%).   I mean this fuction would be only auto activated when DD reach an extrem value. It's a prevention mesurement only to sleep a little bit better when this situation occours :).  Thank for your recomendation. I will keep on backtesting other years and analyzing other scenarios.

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Andrey Khatimlianskyi
Quote from Francisco 123321

Hello Andrey. Nice too see you again. Congratulations for your project. It's very interesting.  

There will be many cases with 5 opened trades but not many cases with 5 opened trades and a current DD of - 65% or more. At least in my bactest of 2020 only one time  occoured (the 1º DD=81,39%).   I mean this fuction would be only auto activated when DD reach an extrem value. It's a prevention mesurement only to sleep a little bit better when this situation occours :).  Thank for your recomendation. I will keep on backtesting other years and analyzing other scenarios.

Thanks for the details!

So, EA should hedge all the deals on big DD (for example, >= 65%).

But when should it close the hedge? When DD is <= 60%?

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Francisco 123321

No, we would close the hedge when we have a bit of evidence that the trend has concluded. Look at the first chart of Tradingview, the third arrow. When the bar of 4H TF crosses and close up the smothed Heiken Ashi indicator the hedge would be closed giving profits to the balance to support  DD. Smothed Heiken Ashi indicator is quite good to detect trend changes. So its combined two TF: operations on 5M and trend filter on 4H 

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Andrey Khatimlianskyi

Why should we open any BUYs on descending Smothed Heiken Ashi then? )

Your idea is clear: lock the loss at some point and unlock it by signal.

Let's start with implementing Smothed Heiken Ashi filter (we have such topic, I guess) and then add this "DD locking algorithm".

What do you think?

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Francisco 123321

No, we should not open any BUYs on descending Smothed Heiken Ashi.  I do not mean to add any new signal to CP EA v.2.25. Only that if we found this situation of 5 opened positions with an extrem DD, the EA should scan and check the price position in relation with Smothed Heiken Ashi (bigger TF) and use it as a guide to end the hedge when we have the reversal to prevent margin call.  Its more confortable to see the descending way with a hedge!. Maybe it makes more sense for a very extrem situation and a time filter as well. For example DD -70% (could be selected %) during more than X time,  just to not interfere too much with its normal functionality of the EA which is allready very good.  The fuction  is based  in the observation that in a long and big DD there is always behind a clear trend well identified by Smotheed Heiken Ashi indicator. 

In my chart above, 1,2, 3, 4,5 represent the 5 martingale opened positions. 

I think that all EA users are interested in safety so if its ok with the comunity it would be nice to give a bit more peace of mind to who would like to use this account protection option. Thank you.

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Andrey Khatimlianskyi

But on your screen only 1st buy was opened on growing Heiken Ashi. All other trades were opened on the down-trend ;)

I'm trying to think global and to make universal parameters.

So, I'm going to add HA filter (you'll be able to use it for open/close/open martin/partial close, as all other filters) first.


Then we can add "Lock DrawDown" mode which activates on some DD % (or just on move from last order) and assign it's deactivation to HA filter (or to any other filter available in the EA).

Do you like this idea?

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Francisco 123321

Yes, I like this idea. Thank you. 


I was thinking that  “Lock DrawDown” mode should not take in consideration, at first, Smoothed Heiken Ashi Indicator to trade its own rules. Unless you had already planned for it.

I meant that CP EA v.2.25 places its deals as per its own rules independently to Smoothed Heiken Ashi.


“Lock DrawDown” would only manage the 5 existing opened positions with big DD by blocking temporarily the increasing overall lose with a hedge until Smoothed Heiken Ashi of higher TF reverse the trend of higher TF (4H). 


Even while the hedge is on the EA should place new deals as per its own default settings. After one bar 4H or X TF closed up Smoothed Heiken Ashi indicator and reversed the trend, EA  would close the hedge and continue its own recovery martingale rules.

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Andrey Khatimlianskyi
  • Planned (collecting votes)
Quote from Francisco 123321

Yes, I like this idea. Thank you. 


I was thinking that  “Lock DrawDown” mode should not take in consideration, at first, Smoothed Heiken Ashi Indicator to trade its own rules. Unless you had already planned for it.

I meant that CP EA v.2.25 places its deals as per its own rules independently to Smoothed Heiken Ashi.


“Lock DrawDown” would only manage the 5 existing opened positions with big DD by blocking temporarily the increasing overall lose with a hedge until Smoothed Heiken Ashi of higher TF reverse the trend of higher TF (4H). 


Even while the hedge is on the EA should place new deals as per its own default settings. After one bar 4H or X TF closed up Smoothed Heiken Ashi indicator and reversed the trend, EA  would close the hedge and continue its own recovery martingale rules.

You'll be able to apply HA to the new openings or not.

As well as apply it to "Lock DD" algorithm.

But I don't agree with you about continuing of open new deals as usual in the "lock" mode. EA shouldn't open new martin deals if it is in lock. It will open the next martin deal as soon as lock is closed.

Let's implement it!