Forex Robo Trading

Posts Tagged ‘martingale strategy’

Forex Maestro Enigma

July 16th, 2009

The real money doubling robot? At least at the moment…

Forex Maestro by design is unlikely to perform well over the long run, as it uses a variation of the Martingale strategy. This is really the exact opposite of what would be considered “good money management rules” for trading Forex and I’m sure it will make Bill Poulos shudder.

When a position is opened, the prudent strategy is to set your stop loss to at a position where you don’t expect the market to go, while at the same time keeping the maximum potential loss to a minimum. If the market moves against you, your position is exited with a known minimal loss. The logic being, the premise of the trade was wrong and there is no reason for you to remain in the trade. Take the small loss and look for another opportunity.

With the Martingale strategy, rather than exit the position, you take out a new position at the current price, lowering your average percentage loss. If the price moves in your favor, you can now exit with a profit overall. If the price continues to move against you, another position is opened to again reduce the average percentage loss. Most of the time this works but every now and then this is going to end in disaster.

Clearly this is not a sound trading strategy for success in the long run. However not everyone is looking for long run solutions. If you are looking for a way to quickly grow an account balance or are just trading Forex for fun and are using money you can afford to lose. Then Maestro could fit the bill.

Out of all the robots currently being forward tested, Maestro has put in the biggest gains over the past 2 months. How long will this winning run last? It is impossible to say but it has almost doubled the initial starting balance on this demo account in less than 2 months.

Here are the live results from Maestro. Starting with $5000 on May 25th. It’s balance is currently sitting at $9290 in less than 2 months.

Maestro goes against all sound money management rules and no one should even dream of trading live money with this robot over the long term, because it is eventually going to lose big. Perhaps even wipe out the account balance.

However one approach to a robot such as Maestro, is to apply good money management rules to the account balance itself. The strategy would be, let it trade until the initial balance has been doubled then withdraw the initial deposit and leave it to trade with what is essentially free money. Your account balance is the stop loss. In every trade, you are potentially risking the entire account balance. So the account balance itself is your level of risk exposure.

This should only be done with recreational money, money you can afford to lose as Murphy’s law will probably apply. That being, the moment real money is deposited, the robot loses.

And don’t trade Forex Maestro with their recommended broker. Last time I checked, I couldn’t even determine in which country the broker was located. A scam? I hope not.

As always, stick with a broker you know and trust.

Update: It seems that Maestro may no longer be available. However here is another Forex Robot that makes no secret of the fact that it is based on the Martingale theory.