EasyWaka: Risk Management
When trading with a grid system, you typically don’t experience realized losses, but you may encounter floating drawdowns from time to time. Significant drawdowns are usually rare, but it all depends on the risks you set.
You can choose very high risks and potentially lose your entire deposit with a small market movement, or you can opt for lower risks and withstand even severe market conditions, like the 2007–2009 financial crisis, without a scratch.
How can you best manage this? We usually recommend the following approach:
- Imagine the largest floating drawdown you’re comfortable handling with the EA.
- Multiply that value by 2.
- Select a risk level where historical drawdowns did not exceed this multiplied value.
Why multiply the drawdown? Any trading system will eventually surpass its historical drawdown. Grid trading systems, in particular, carry greater variability in risk over time, so this x2 margin helps account for unforeseen events that may arise in the future.
Below, you’ll find a table with EasyWaka test results using high-quality tick data from various sources:
