In this video, I wanted to talk about risk.
This is the Forex Trading Framework from October 2017, right now it’s trading the RSI indicator, this is the “graph” tab from the strategy tester and here you can see that we make a little bit profit, but most people would say that this is very boring for an account of this size it’s not making enough profit and it takes too long.
Well, the other side of the equation is that this is also not very risky.
We didn’t make much profit but we also didn’t have a lot of risk. The total net profit is 43 Dollars.
I know every trader has a different risk tolerance and so I included an external trading risk user variable here, right now it’s very low. This input modifier here in the source code allows you to change the variable without recompiling the code. Ten would be very high and everything above would be insane!
Now, let’s change this risk here and use a value of five!
This time it seems to go a little bit faster, we already made some profit, but you have also increased the risk here. Now, you might say higher profits are worth a higher risk but believe me a lot of people would close the account right here!
Now our test should be finished soon, this is it.
This time we made a total net profit of 5213 Dollars.
Now, let’s change the trading risk variable to ten – I would consider this one as very risky, but you might see that it trades a lot of positions.
Right now, we have already made 14 thousand profit, but those drawdowns here will get bigger whenever you increase the risk.
Believe me, seeing your real account going down like here will cost you sleepless nights, but the possible gain is also much higher now.
As I said; I wouldn’t trade that on a real account but you might have a different risk tolerance.
By the way, you never could trade so many positions without automation! And that’s the reason why so many people complain about missing entries and why automated trading becomes more and more popular these days. This test series should come to an end very soon and I would already say we will make a good profit, but trading is risky and everything can happen.
When you see a big drawdown here that will eat up 50,000 Dollars you will be in real pain, no matter if you made 150 grand before!
It’s no problem to watch something like this on a demo account but it’s a very different experience on a real account!
Here is our result! We made a total net profit of 99,980 Dollars.
Now, I wouldn’t recommend to go above ten, but just for demonstration purposes let’s change the value to twenty!
I will maximize the window here and now you can see what is possible! This is the exact same Expert Advisor, trading the same currency pair. The only thing I have changed is the trading risk, and this is how it would perform if you had traded the Euro/ US Dollar in 2016.