@BenNathanFTA who wrote,
'My opinion on this (take it or leave it, makes no odds) is this:
1) ALL EAs blow eventually
2) Most EAs risk too much
3) Most EAs will at some point give you nasty draw down
My respects Sir, We all indeed have our opinions and I respect yours, but I would like to thank you for the curtsy of saying that it is your opinion and not that someone else is some low life (add favorite derogatory comments here) because they have another opinion.
With your permission, I would like to disagree with your conclusions for a number of reasons. You have developed your opinion based on your experiences as I base mine on my experiences. So here is what I think.
First, well over half of all trades made are made by computers. When the stock markets drops by some large amount they shut off the computers and the prices almost stop. They don't stop live traders from trading. No matter if we agree on what the actual percentage is or not, there are a bunch of computers out there trading. To state the 'all' EAs blow up eventually is unprovable and all we need is one EA that doesn't blow up and your statement becomes an error.
Everyone, and certainly every chess player said, and firmly believed, that a computer would never beat a human Grandmaster, it was just impossible until Deep Blue did it in the 1990s. That's when I woke up, computers were out performing humans and it was just getting started.
Number 2; Most EAs risk too much. With the addition of 'most' and 'risk too much' both being unquantifiable, no one could argue with your point, but the EAs that I am familiar with have adjustable risk levels. You can adjust your risk very low as we do or adjust it higher to make more money. In fact that is the debate going on right now, is 2% a month (25% per year) enough or is 4% a month with higher risk warranted?
Third item, 'Most EAs will at some point give you nasty draw down'
Some EAs are designed to use large draw-down Defining large as a program that waist less than half of the account. (Small humor) Technical traders have no idea as to how much draw-down they will have at any given price. Give me a price and I can tell you within 1% more or less how much two of my 4 programs will be in draw. I know what the draw will be to the highest and lowest that the price ever reached. Since I know what the worst case draw will be, I can have enough in my account to cover it.
All the money in the account that is not used to protect the trades is wasted. You are not using it to make money, it is just sitting there so the draw-down can be low. If you know what the draw-down would be, you would be able to adjust your trades so you were not wasting so much. However, those that don't know about adjustable risk factor has to rely on 'what if' and waste the rest.
That is my opinion and why I have developed it.
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