9 Trading Rules With “Dangerous” Robots

Hello, dear reader. In Forex, there are many commercial robots created for the Martingale, Grid, and Averaging Strategy. These robots are classified as dangerous. Are they really that dangerous? Is it possible to earn some profit using them? Read on to discover the nine rules for achieving the maximum success with minimal risks.

First of all, why are those kinds of robots dangerous? The idea is that currency price will, sooner or later, come back to frequently present levels. Following this logic, the robot opens additional trades, increases the volume of lots, or builds a pyramid of the orders. However, the price does not always return to the previous levels, so trading with “casino-type” strategies will, one fine day, lose you all, or a significant part, of the deposit.

However, high risk means high profit: A Martingale type strategy is often several times more profitable than other kinds of robots. It is the same as the famous Russian “MMM” company pyramid, which brings huge profits provided the pyramid does not collapse. Nevertheless, earning profit with “dangerous” robots can be quite stable if we follow certain rules, which we will discuss below.

 

1. Trade only in cent accounts.

The biggest mistake made by beginners is trading in classical or micro accounts. “Dangerous” robots can be traded only in cent accounts. In 99% of cases, they require a huge deposit because many orders are opened. For example, the robot Forex Hacked Pro needs at least $10.000 to trade in the standard account. Whereas, RoboForex cent account robot would need a few tens dollars.

To know more about the cent accounts you can read the post-Standard and Cent accounts.

2. Use the maximum leverage

A lot of traders believe that trading with high leverage is increasing the risk. They say, with less leverage they are less risky. That is nonsense! The risk depends only on the position size and Stop-Loss.

So trading in Martingale or grid strategy requires a large deposit, and it gives high leverage. The optimal variant is 1: 500, preferably greater, such as 1: 1000. Why? Imagine that a lot of open orders are hanging in minus, and if the price does not return to us in a profitable way and goes before us, it can lead us to the complete loss of our deposit (Margin Call). Of course, we want to make sure that such a moment would come as late as possible, and our hanging orders become profitable. So without high leverage we are risking losing the entire pyramid of orders, and all or a significant part of the deposit.

3. Take note of the recommendations in the manual

Robot files are often accompanied by a manual containing several recommendations, which requires a minimum deposit, the size of which is of a lot of recommended trading, and that a currency pair is the most profitable, etc. But those recommendations are often ignored. Traders often just downloaded a robot, and quickly put it on an account.

Do not be stupid! If some recommendations accompany the robot, it means that whoever wrote them has some experience with this robot, or tested his trading history using it. Why do we repeat the mistakes that others have already made? If it is written in the manual that the minimal deposit is at least $300, it means there is no point hanging on $10 deposit. Similar cases are very common, but it’s strange – maybe people are too lazy to read the manual, or do they think that they are more intelligent?

So I will repeat once more: be sure to read the recommendations!

4. Be sure to test it

An experience of other traders is, of course, good, but you should not rely solely on it. Before putting the robot on the chart, especially on a real money account, be sure to test its performance in MetaTreider4 strategy tester. Through the testing, specify exactly the size of the future deposit and all other settings used in a real trade. You should know in advance what a possible drawdown could be, and whether your deposit will be sufficient - maybe you need to increase it, etc.

5. Withdraw the profit regularly

However excellent the test results are, and whatever “brilliant” settings you choose, sooner or later a dangerous robot stands to lose all, or a significant part, of your deposit. Believe me, it happens. Maybe tomorrow, maybe in a year, but it will happen. Don’t be afraid, it is inevitable because the pyramid can collapse at any moment.
So you must set yourself a strict rule: once a month or once a week, withdraw the profit you have earned. Ideally, you should withdraw the profit equal to the deposit.

6. Understand the logic of the robot

Take your time putting the robot on real money account. You must study the robot carefully. How often does it opens trades? How long does it hold them? What are its weaknesses and strengths? A Simple test in MetaTrader 4 strategy tester often is not enough. Place the robot on a demo account and watch the results for several weeks or even months. It will save you from losing a lot of money.

7. Trade on Swap-Free accounts

If you discover that your robot (see 6 above) holds opened positions for a few weeks or even months (there are such kinds of robots), then you should choose the Swap-Free account. It will help you to prevent additional losses due to adverse swaps (a commission for the transfer position into next day).

8. Use VPS server

Just imagine yourself – your robot just opened the pyramid of the orders, and the electricity power outage shuts down for several hours in your house. Or your Internet Service Provider has decided to do unplanned repairs, and disables your Internet connection. Force Majeure? Exactly. If this happens, you may lose not only your profit, but also the deposit because, without access to the Internet and electric power, the robot will not be able to close the positions.

Avoid such unpleasant situations by using a VPS server service.

9. Trade with floating and tight spreads

The tighter spread the better. It will be very disappointing if a pyramid of the orders does not close because the spread size, for example if a couple of pips to Take Profit close will not be enough. It is better to pay an extra commission for the opening order and to trade with smaller spreads.

Of course, each robot has its nuances, but these nine rules will help you so far as is possible, to obtain a stable profit in “dangerous” robots trading.

Take care and good trading.