Exciting News About Forex MegaDroid!

Yesterday I received another email from Forex MegaDroid support, containing what Albert and John say is "some exciting news… Version 1.10 of Forex MegaDroid is ready for release". Actually it seems it's not quite ready yet, because "we are simply finishing the updates to the manual before making it available."

In a section about "why 95% of traders lose money" their email also contains the following observation:

A high number of average (or worse) probability trades means that an account must be traded with a very low risk level i.e. about 1%, so mediocre returns are likely at best. Of course, there will be periods where good returns can be made through the volume of trades but this, without exception, eventually results in the total devastation of trading accounts – anyone who has traded a Martengale-style robot can confirm this… awesome results until the market makes a large move in one direction (as EUR/USD did last week – several times!) then the account balance drops to zero in the blink of an eye.

Call me pedantic if you like, but I feel that I must point out that the correct spelling is in fact Martingale, not Martengale. A quick look at Wikipedia will confirm that, although over there they talk about a "betting system" rather than a "trading system". Pedantry aside, it sounds as though Albert and John do not recommend Martingale-style position sizing.

Now I don't know what version 1.10 of the Forex MegaDroid manual has to say on the subject yet, but version 1.0 talks about a Recovery Mode that you can use with their robot. Apparently "in the event of a losing trade the LotSize for all trades is doubled until the loss has been recovered". This sounds to me a whole lot like the standard Martingale strategy, described by Wikipedia as follows:

The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake.

I don't know about you, but I found myself even more confused and frustrated by these apparent contradictions. To try and achieve some clarity I did what I suggest you do too, and went away to do some backtesting on a forex trading system that incorporates Martingale-style position sizing. Check out example 2 in the Trading Gurus course on how to build your own forex trading system.

As you will see, even that extremely simple "Martingale-style robot" didn't cause the demo account balance to drop to zero several times last week.