In all our Martingale EA, we always put the following quote.
This EA is using Martingale based strategy. All Martingale strategy always has a risk of Margin Call ( MC ).
It is undeniable that all Martingale strategy always has a risk of Margin Call and a lot of time, the margin call is always caused by a series of events, which make it really hard to predict. For example, the EURUSD drops due to bad non-farm payroll, and your EA has already opened 15 orders. Then another weak PMI data from the US and your EA opened another 10 orders. In this case, it already has 25 orders. Lastly, FOMC announced the reduction of interest, and EURUSD drop further and it hits the margin call.
Although the risk of Margin call is unavoided, there are still some options that you can use to manage the risk. This article is to share the options that you can do at this risky moment.
Define Risky Moment
With our current lot size calculation of Capital/200,000, Limitless EA and Ophiuchus EA are designed to be able to open up to 24-26 orders. Hence, for Limitless EA and Ophiuchus EA, Risky Moment is when your Expert Advisor (EA) has opened up to 18 orders and above.
Options
The following are the options that you can do on Risky Moment.
- Do Nothing -> Continue to let the EA open order. When the EA open more order, it will always bring the Target Price (TP) closer to the current price. Once the trend reverses, it will hit the TP and close with profit.
- Press Close Profit Order Button -> There is a “Close Profit Order” button on the left side panel. If you click that button, at that moment, all orders with profit will close, and only those without profit one will remain, but the TP will become further too. This is good at reducing the risk of margin calls but sometimes will make the orders take longer time to close as it will require a bigger trend reversal to hit the TP. Hence, only use this when you think it is necessary. Especially when your account has many opening orders and you know that there will be a high-impact economic announcement for EURUSD, you can first check the last few economic announcements to see whether it is better or worse than expected recently. If you think that the upcoming economic announcement might be bad, then you can monitor the trend of EURUSD before the announcement, when it rebounds to a certain area and you can decide to click Close Profit Order to reduce the opening orders. In that case, your EA will have more runway even if the economic announcement is worse than expected.
- Top Up your capital -> Top up your capital so that it has more capital to open more orders and prevent margin calls. For this approach, it is very important to have a hard limit on how much you are willing to top up. Although this will give your EA more runway, it is also possible that eventually, you lose all your capital including your top-up amount. One of the observations that we found in our backtest is, even with starting lot size of .0.01 and USD2,000 as capital, there is one situation in the past that you will need to top up to USD 80,000 to be able to prevent margin call. In other words, there is some margin call that is unavoidable even if you top up your capital. Hence, you must consider the amount that you are comfortable to top up in that situation. Once it hit your hard limit, you will just let it either hit margin call and take the loss or it recovers. Once you have this hard limit in your mind, then you won’t feel so stressed when it happens and just need to ensure you follow the plan. Besides, if you decide to top up, you need to consider the time needed for the broker to process your deposit to ensure the capital can be in your account in time.
- Press the Close All Orders Button -> You can monitor the trend and when it reverses and your loss is getting smaller, you can decide to click the “Close All Orders” button on the left side panel to take the loss. In this case, you will materialize the loss that you see now.
- Stop the EA to open any new order -> You can stop the EA to open any new order by setting the Maximum # of trades to the current # of open trades. For example, if your current opening trade is 20, you can set this Maximum # of trades to 20. If you want it to open another few trades only, you also can set it to 22 or 23. The con of this approach is the target price will not change to closer to the current price as no new trade opens. But it allows you to reserve more margin if the price continues to go in the opposite direction of your trade. You should only use this if you believe the opposite trend will continue for some time and then you only increase the Maximum # of trades when you observe the trend change.
With the options above, if you know how to read charts and perform some technical analysis, you can perform some analysis to see whether the trend will continue or rebound and then only decide the options to take for your situation. However, please note that all technical analysis is about prediction and probabilities, no one has the crystal ball to know exactly what will happen.
Game Plan
We list one of our Game plans that you can use for reference. However, this is just a sample plan but you should decide your own plan based on your own circumstances. Assuming we are running Ophiuchus EA with starting lot size of 0.01 and with a capital of USD 2,000, we also will assume the worst case for all situations below just to help to illustrate the sample plan.
- In the risky moment ( Opening Orders of more than 18), we will first check whether there is any upcoming economic announcement for EURUSD. If there is, we will look at the last 3 announcements to see whether it is better or worse than the expected result. Based on that, for the current plan, we assume that the upcoming result will be bad.
- We perform some technical analysis based on the chart and we believe the rebound won’t happen anytime soon.
- We monitor the last few hours before the announcement, if there is a good rebound and if we can close multiple orders, then we will click the close profit orders button to close some orders.
- Assuming there is no chance for us to close profit orders, then we have decided to top up to our maximum hard limit, which is to add an additional 1 time of USD 2,000. We top up early so that this capital will be ready in the account earlier.
- In this case, we have USD 4,000 inside the account for the EA to run. If it rebounds and manages to close, then it is good. If the situation still goes south, and it hits the margin call. We lose USD 4,000 and we have to accept it.
Mindset
Once you have your plan in mind, if you fall into a risky moment, you should feel less stressed as you have mentally prepared for the hard landing. However, if you still feel extremely stressed in this situation, then you need to consider the following.
- Are you putting too much capital and it is more than you can mentally afford for the loss?
- Is this trading strategy suitable for you?
If you realize that the amount that you put in is too much for you, it is probably a good idea to reduce the capital in your account to an acceptable level. Please note that you should always only use your additional fund for this kind of trading strategy. If your fund is meant to be used in the near term, it shouldn’t use for this trading strategy as 100% loss is always possible.
Hope this article can help you to manage better with our Martingale Strategy EA. Happy Trading!