Automated tradingUpdated 3 min readBy the FXNOD team
Can trading bots lose money?
Yes. A trading bot can lose money, including the entire balance of the account it trades. A bot follows its rules without judgment, so a losing rule loses automatically and quickly. No bot can guarantee a profit. What you control is how much a session can lose, through the stake, the stop loss and the way the stake changes after a loss.
The four ways a bot loses
- The strategy has no edge. On a contract that pays less than it risks, a rule that wins by chance loses a little on average, on every trade, for ever.
- The stake is too large for the balance. An ordinary losing streak ends the session before the strategy has had a fair number of trades.
- The stake grows after losses. Martingale turns a string of small losses into one very large one.
- Nobody is watching the limits. A bot with no stop loss, or one whose stop loss lives in a browser tab that closed, has no floor.
Why a bot loses faster than a person
A person trading by hand places perhaps a few dozen trades in a session, pauses after a loss, and gets tired. A bot on one-tick contracts can place hundreds of trades an hour and never pauses. Speed multiplies whatever the average result per trade is. If that average is slightly negative, speed is the problem.
The arithmetic of a small disadvantage
Take a contract with two equally likely outcomes that pays a profit of 95 for every 100 staked. Over 1,000 trades at a stake of 1 you would expect about 500 wins of 0.95 and 500 losses of 1: a loss of about 25. Nothing dramatic happened on any single trade. That steady drain is what a strategy without an edge looks like, and no stake pattern changes it. Stake patterns only change when the loss arrives.
What limits the damage
Set a session stop loss you can afford
Choose it before you start, as money, and treat reaching it as a normal outcome.
Keep the stake small against the stop loss
A stake of 1% to 2% of the session's stop loss budget leaves room for a losing streak.
Prefer a flat stake
It is the only sizing where the worst case is easy to see: the stake multiplied by the number of losses.
Know your worst trade
If the stake can grow, work out the largest single stake the settings allow. That is the amount one trade can lose.
Questions people ask
- Can a bot lose more than my stop loss?
- By a limited amount, yes. A stop loss is checked before each trade, so the final trade can carry the session past it by up to that trade's stake. With a flat stake the overshoot is small. With a growing stake it can be large.
- Can a bot lose more than my account balance?
- On Deriv options contracts the most a trade can lose is its stake, so the balance cannot go below zero from those trades. Other products and other brokers work differently. Check the terms of the contract you trade.
- Is there a bot that never loses?
- No. Anyone selling one is selling a bot that has not lost yet, usually a Martingale shown over a short period.
Run a bot that keeps its limits
FXNOD's bots run on its servers and will not start without a stop loss, so your limits hold when your device is off. Build one in Bot Forge or start a ready-made one in Auto Hub, on your Deriv demo account first.
Get started