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Automatic Loss Recovery System (ALR) - read this first
https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=3682		 Page 15 of 40
Author:  alfonsomg [ Tue Jul 01, 2014 4:22 pm ]
Post subject:  Automatic Loss Recovery System (ALR)
Eamonn » Tue Jul 01, 2014 3:32 pm wrote:
madpipa » Tue Jul 01, 2014 7:30 am wrote:Hi Eamonn,

If you lose after a number of turns you would end up losing 20 pips (or close enough - disregard spread etc for now).
The problem arises in that each new trade in the opposite direction is increased in lot size. Lets say you are using TP = 60 & ALR = 20, starting with 0.10 lot size for the first trade.

Assume the trade doesn't reach TP & hits the ALR level. Say it does this 10 times before eventually being stopped out of the trade. The lot sizes would be:
1 = 0.10
2 = 0.14
3 = 0.09
4 = 0.12
5 = 0.16
6 = 0.21
7 = 0.28
8 = 0.37
9 = 0.49
10 = 0.66

So your net exposure is 0.38 lots. So while you may have still only lost 20 pips you stand to lose close to 4 times your initial risk. That is where the martingale aspect comes in.

Hope that helps explain it.
Hi Madpipa

I understand martingale and don't need it explaining, but what I don't understand is that "I stand to lose close to 4 times my risk" I'm not, I'm going to lose 20 pips and that's it nothing more.

I know I will be using more lots(exposure) to do this but that's my risk and if it is 4 times what I'm comfortable with then maybe I will use a quarter of the lots to start with.


Don't want too sound antagonistic, just want us all to make pips,


Eamonn.
Hi Eamonn and the rest. I agree with Madpipa. Amount of pips means nothing if it is not in the context of the lot size. You guys know that 20 pips with 4 lots means same than 80 pips with one lot. In the end if you hit the cap of turns you probably have piled up more than the initial amount you were willing to risk.
Author:  Dewey McG [ Tue Jul 01, 2014 6:11 pm ]
Post subject:  Automatic Loss Recovery System (ALR)
kotsh » Tue Jul 01, 2014 10:01 am wrote:Hi Guys,

I found this link to the ALR EA manual. Shows what exactly are the EA inputs and the trade sizes (which were not very clear to me in the videos)

http://www.forextradersdaily.com/alr/wp ... tGuide.pdf

Starting position is 0.1 std lot.
Thanks. I just had a quick peak and then have to run. Sadly he doesn't give people buying this any advice regarding risk and just tells them to keep an eye on it. Also, he always starts with .1 lots rather than adjust for risk and account size. Not good. We can do better.
Author:  Dewey McG [ Tue Jul 01, 2014 6:12 pm ]
Post subject:  Automatic Loss Recovery System (ALR)
alfonsomg » Tue Jul 01, 2014 12:22 pm wrote:
Hi Eamonn and the rest. I agree with Madpipa. Amount of pips means nothing if it is not in the context of the lot size. You guys know that 20 pips with 4 lots means same than 80 pips with one lot. In the end if you hit the cap of turns you probably have piled up more than the initial amount you were willing to risk.
If you use the ALR calculator you can specify how much you are willing to risk.
Author:  garyfritz [ Tue Jul 01, 2014 10:49 pm ]
Post subject:  Automatic Loss Recovery System (ALR)
Eamonn » Tue Jul 01, 2014 9:32 am wrote:I understand martingale and don't need it explaining, but what I don't understand is that "I stand to lose close to 4 times my risk" I'm not, I'm going to lose 20 pips and that's it nothing more.
Not true. You lose 20 pips EVERY time the ALR reverses. The actual size of the loss depends on the size progression you use for the ALR.

If you hit the TP before the give-up-bail-out point, then you'll probably roughly break even. Everybody is happy when that happens.

But if you hit the bail-out point, you will take a LARGE loss. See e.g. my example in this post. If you go 12 turns in that example, your loss at bail-out is basically **720** pips. With random market movement, that would happen about every 46 ALR entries. madpipa showed that it DOES go into that many trades.
Author:  madpipa [ Wed Jul 02, 2014 12:03 am ]
Post subject:  Automatic Loss Recovery System (ALR)
I have modified an EA to close at a pre-defined number of trades - MaxOrders. It is attached.

Do NOT use this on a live account - it is for DEMO TESTING ONLY.

I ran a backtest on EURUSD starting with lot size = 0.10 lots. So 1 pip = $1. Limited MaxOrders = 12 to simulate garyfritz's example in the previous post. Then I ran the EA from start of 2013. In January it had a set of 12 trades & finished by closing all trades at the SL/ALR level. Here are the results:
EU 12 trades.png
Before this set of trades started the Account Balance = $10242.69. After the 12 trades were closed it dropped to $9800.60. So the group of trades lost about $442.

The initial risk was 20 pips = $20. The final loss = $440.

I have checked my calcs against those in the pdf from Dustin's EA (thanks for the link kotsh). I agree up to the 8th trade. After that his lot sizes grow progressively larger than mine. I'm guessing he may have added 0.01 to the 9th trade in order to cover potential growing losses to do with swap & spreads? In any case, if his numbers are correct then the loss would be greater than my EA shows.

Either way you can see that this style of EA has the potential to create larger losses. And that is why Dewey, kotsh, wealthmaster & others are trying to reduce possible losses by limiting the number of legs.

Have a play with the EA guys & see if you can find some sort of a solution. My approach is to look at the number of legs/turns in a currency pair - EURUSD to start with - and then look to see how many times each number of legs/turns occurs. This may give an indication of the "sweet spot" where we can reduce exposure & still expect a fairly high percentage of ALR trades to reach about breakeven.
Author:  JellyBaby [ Wed Jul 02, 2014 12:32 am ]
Post subject:  Automatic Loss Recovery System (ALR)
What happens if you slowly reduce the lot size as suggested by garyfritz? Can you get out at break even after say 10 trades?
Author:  madpipa [ Wed Jul 02, 2014 12:51 am ]
Post subject:  Automatic Loss Recovery System (ALR)
JellyBaby » Wed Jul 02, 2014 10:32 am wrote:What happens if you slowly reduce the lot size as suggested by garyfritz? Can you get out at break even after say 10 trades?
I don't know - I haven't tried. Looking at the trades I posted though I would suggest you can't get out at breakeven unless you reach the ALR TP. If you reach the maximum number of orders you will always finish up at one side of the ALR channel as defined by the original trade's TP & SL. Let's say the first trade was a BUY & use TP = 60 & SL = 20. After 6 trades you would have 3 Buys, 3 Sells. If they were all closed at the level where the sell trades were opened then the 3 Sells would return about zero. The 3 Buys would each be down about 20 pips. The Buy lot sizes would be 0.10, 0.05 & 0.07. Total of 0.22 lots. So your loss would be about $22. I don't see any way of avoiding a loss unless you are prepared to let the ALR EA keep trading until it eventually reaches either the Buy TP or Sell TP.

Unless I'm missing something I don't see how reducing lot sizes could change that. I don't want to speak for Gary but I think he was saying it would reduce the risk/exposure by reducing the lot sizes as the trade numbers started to grow compared to continuing to let the trade size grow.
Author:  Dewey McG [ Wed Jul 02, 2014 2:27 am ]
Post subject:  Automatic Loss Recovery System (ALR)
madpipa » Tue Jul 01, 2014 8:03 pm wrote:I have modified an EA to close at a pre-defined number of trades - MaxOrders. It is attached.

Do NOT use this on a live account - it is for DEMO TESTING ONLY.

I ran a backtest on EURUSD starting with lot size = 0.10 lots. So 1 pip = $1. Limited MaxOrders = 12 to simulate garyfritz's example in the previous post. Then I ran the EA from start of 2013. In January it had a set of 12 trades & finished by closing all trades at the SL/ALR level. Here are the results:



Before this set of trades started the Account Balance = $10242.69. After the 12 trades were closed it dropped to $9800.60. So the group of trades lost about $442.

The initial risk was 20 pips = $20. The final loss = $440.

I have checked my calcs against those in the pdf from Dustin's EA (thanks for the link kotsh). I agree up to the 8th trade. After that his lot sizes grow progressively larger than mine. I'm guessing he may have added 0.01 to the 9th trade in order to cover potential growing losses to do with swap & spreads? In any case, if his numbers are correct then the loss would be greater than my EA shows.

Either way you can see that this style of EA has the potential to create larger losses. And that is why Dewey, kotsh, wealthmaster & others are trying to reduce possible losses by limiting the number of legs.

Have a play with the EA guys & see if you can find some sort of a solution. My approach is to look at the number of legs/turns in a currency pair - EURUSD to start with - and then look to see how many times each number of legs/turns occurs. This may give an indication of the "sweet spot" where we can reduce exposure & still expect a fairly high percentage of ALR trades to reach about breakeven.

I appreciate all your work.

Now if I could ask a favor--at most this would prove how well it works on random orders. I would like to see how well it works with a decent strategy on pairs where I suspect the performance would be better suited.

Any chance you could make the EA using the strategy posted here: http://www.stevehopwoodforex.com/phpBB3 ... 100#p95199

It is simple and should be easy to code but would give me something better to test with. Now if you are feeling particularly magnanimous add a parameter where we can specify a minimum angle for the LWMA 240. I have no idea how that can be done other than eyeballing it, but have heard of indicators that look at the MA's angle.
With visual back-testing on pairs like the EURNZD it performs very well and I have not seen where it goes more than a few turns, but visual back-testing is not the best way to test.
Author:  RedLineFred [ Wed Jul 02, 2014 3:20 am ]
Post subject:  Automatic Loss Recovery System (ALR)
Interesting discussion folks.

A couple of additional points that you may not have considered:

1. Get the entry right, in a trending market, and you wont need more than a couple of pushes.

2. Dont try to close out on a pip move, rather monitor your equity and only close all trades when actually at BE. This can be coded on the basis of recording the account balance before you enter your first trade and then only close all trades when the account equity returns to this level. Or if you like, pushes into a small profit.
Author:  kotsh [ Wed Jul 02, 2014 5:00 am ]
Post subject:  Automatic Loss Recovery System (ALR)
Dewey McG » Wed Jul 02, 2014 4:11 am wrote:
kotsh » Tue Jul 01, 2014 10:01 am wrote:Hi Guys,

I found this link to the ALR EA manual. Shows what exactly are the EA inputs and the trade sizes (which were not very clear to me in the videos)

http://www.forextradersdaily.com/alr/wp ... tGuide.pdf

Starting position is 0.1 std lot.
Thanks. I just had a quick peak and then have to run. Sadly he doesn't give people buying this any advice regarding risk and just tells them to keep an eye on it. Also, he always starts with .1 lots rather than adjust for risk and account size. Not good. We can do better.
Dewey, the 0.1 std lot is not an ALWAYS thing. The EA reads the size of the position from the ticket number you put in the input and would adjust the ALR trade sizes accordingly, same as in my sheet :)

0.1 lots is always used for examples to make it easier to calculate profit/loss w.r.t. pips.
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