The lowdown on drawdown - or - What is drawdown and why does it matter in automatic forex trading?

650% profit in the first 60 days trading!  

Win 100 pips with every trade! 

Never a losing trade! 

Claims like these are plentiful in the world of automatic forex trading - you can barely turn around without bumping into a new Forex Robot claiming sky high returns on your investment. However, rarely are we told what amount of your initial investment was in danger during trading to achieve such outrageous returns. 
The level of risk involved in a trading strategy is what we call its "drawdown".

Drawdown is the reduction of one's capital after a series of losing trades. This is normally calculated by getting the difference between a relative peak in equity capital minus a relative trough. Traders normally note this down as a percentage of their trading account. 

Drawdown is the very feature by which to evaluate the validity of the outrageous profit claims many Forex robots make. Surely, if the robot is planning to be risking 90% of your investment capital, the darn thing better have some hopes of astronomical profit - otherwise why take such an enormous risk. 
But we all know what happens in reality when sound money management goes out the window: One bad trade and your account is wrecked beyond repair.

Sound money management, with reasonable drawdown, in a low risk setting is the only way to make progress. Insane trading, with no sound controls, only to put your account at risk, always being at the mercy of one trade that could end it all, is a sure way to get an ulcer and lose your trading capital. Might as well go back to manual trading, at least you enjoy the gambling...

So, when evaluating your next Forex Trading Robot please, instead of being seduced by great sounding profit promises, take a close look at the risk settings used to obtain these profits.

Oh - and that last promise of "Never a losing trade" is of course completely silly - it is the equivalent of playing roulette and betting on the little ball never landing on "zero" again - won't happen - ever.

Man Versus Machine: The Advantages of Automatic Trading

As a long time trader I was skeptical regarding the idea of Automatic Trading when it was first implemented in a large scale in the 90ies. After all did it not in some way threaten the very existence of my profession?
What a long way we have come!
Automatic Trading is not only here to stay, but it has really revolutionized the way we trade.
The advantages of trading robots are of course obvious.

• No Emotions
• Fast execution - no hesitations
• No "variations" on the strategy
• flexibility

Whereas the first three points are clear to all who have ever witnessed a "Forex Robot" or "Expert Advisor" trade a live account the last point seems some what arbitrary.

All decent Forex automatic trading systems employ filters to choose entries and exits - they are after all what differentiates one system from the other.

In a sophisticated robot you can control these filters and adjust them to what is going on this year, month or the last 24 hours - with as much involvement as you see fit.

The trader of today spends most of his day tweaking and expanding strategy - not really having to worry about execution of trades.

We have all become statisticians and been able to develop the most sophisticated strategies yet.

What we gave up was a sort of renegade cowboy feel that came with so much stress it certainly shortened our lives.

I think it was an excellent trade!

Fx Trading made easy

Making a living trading Forex can be:

-Stressful or relaxed?

-Frustrating or profitable?

-Manual or Automated Forex Trading?

Trading Forex can be a rewarding full time activity, particularly if you are fond of heartburn, sleepless nights and overall stress and frustration.

Or it can be easy, relaxed and profitable.

Here is what we mean: 

Manual Forex trading is an absorbing endeavor if you are a market lover. We enjoy studying it and making sense of its ways.

Guessing trades, just the adrenaline rush is enough to keep you coming. But look at me, I’m talking like an addict, a gambling addict. Unless you are very, very good at guessing the ways of the market, the only reason to keep coming back is the gambling, because making a regular income at it is difficult at best.

Trading Forex for a living is a tough sell if you consider the difficult Forex market hours and the unpredictable behavior that often rewards hard study with massive losses. You must love it to endure it. Otherwise you won’t survive it.

Or you can let computers do the job for you: trade Forex the easy way.

Sure, there is no adrenaline rush in Forex automated trading. But if what you are looking for is long term profits, not gambling kicks, it’s the best alternative.

No more waking up for the London Session, no more Stress, no more guilt in all those times where your emotions took over and you went against your strategy just to take a gamble that set you back weeks.

Robots can do a much better job at following a Forex trading strategy than any trader in Wall Street. 

They execute all trades precisely according to plan, always cool headed, no exceptions. That’s why they work!

Automated Trading is the way of the future: Computers trade much better than humans. Every bank and hedge fund manager knows that.

And while you might enjoy watching the action at a distance, why not let your Forex trading robot do the hard work. 

In Forex, the easy way is the smart and most profitable way. Nothing wrong with working smart, is there?