Alright......To give the new traders to the market some perspective on the insanity of martingale drawdowns..... Today the market was bound in a fairly tight range and closed almost exactly where it opened. I had 4 positions closed today, all on the USDCAD pair for a total of about +$500. During the market craziness my drawdown fluctuated tremendously. At the lowest point of the day, I had a DD of approx -$8,000 , and the DD is currently at about -$18,000. So....the drawdown fluctuated about $10,000 throughout the course of the day. This is minimum risk.....4 pairs (eurusd, gbpusd, usdcad, & eurgbp). The account started at $40,000 a month ago, and is now just short of $50,000. At no point in time has the DD ever been low enough that I could close out all positions and be above my initial deposit amount.
Please, understand that this system WILL tax your account to the maximum limit until it blows your account. All it needs is one solid trend on a single pair. Trends are not very common at the moment, but eventually, the market will start trending again. At that point in time, Whatever pair hits the big trend will be the one to wipe your account clean. It only takes one pair to do it. By the time you realize you are in a solid trend that isn't going to pull back enough to close out without a huge loss, it will be too late. The reason why i am saying this is to prepare you for the inevitable. How fast can it happen?? In realtime.....with my account....I have seen a 50% DD and it only took 3 days for it to develop. It started Nov 14th, 2011 and took until Nov 16th, 2011 to get there. This was technically a 2 day trend as day 3 went sideways. My point is, if I had 50% DD in 3 days, what would have happened if the market had continued trending for 4 days, or even an entire week? The answer is, Margin Call. I have 500:1 leverage on this account and it is running minimum risk.
The real question now is.....How do you deal with it. In the EURUSD only, the positions started with 0.4 lots.....it now has 3 of those.....and in one more of 1.3 lots....add in one more for 2.5 lots.....and add in one more for 3.8 lots... So, in the EURUSD, it has a total of 8.8 lots open at an effective avg price of 1.3561. Current price is 1.3464....so I have the equivalent of an 8.8 lot position open that is currently sitting at -97 pips. Figure $88/pip and you get -$8,536. That is ONE pair. The DD on ONE pair is nearly 25% of my account.....and the market may go down further. 3 days. That is how fast this happened.
I am not telling you this to keep you from using this EA, but I believe it is only fair to have full disclosure. I am tired of being taken advantage of and seeing others being taken advantage of. The only way we are ever going to stop the nonsense is with to fight to get the truth out. Sorry, that this is ruining people's dreams, but look at it this way, would you rather be prepared with knowledge, or let it catch you off guard?
Make losses, but always come out a winner at the end.