Automated tradingUpdated 3 min readBy the FXNOD team
How to manage risk when using a trading bot
Manage risk with a trading bot by fixing five things before it starts: the most the session may lose, a stake small enough to survive a losing streak, a flat stake rather than one that grows after losses, a ceiling on any single stake, and a point at which you take profit and stop. Risk is set in the settings, never during the run.
Start from the loss, not the profit
Decide the amount you can lose today without it mattering tomorrow. That is the session's stop loss. Every other setting is derived from it. People who start from a profit goal end up choosing the stake that reaches the goal fastest, which is also the stake that empties the account fastest.
Size the stake to survive a streak
Losing streaks are longer than intuition suggests. On a 50/50 contract, seven losses in a row has a chance of about 1 in 128 from any given trade, and in a run of 1,000 trades you should expect to meet such a streak around four times. A flat stake of 2% of the stop loss budget lets the session absorb fifty net losses. A stake of 20% ends it after five.
| Stake as a share of the stop loss | Losses in a row that end the session |
|---|---|
| 1% | 100 |
| 2% | 50 |
| 5% | 20 |
| 10% | 10 |
| 25% | 4 |
Understand what Martingale really costs
Doubling after each loss, starting from 1, the stakes run 1, 2, 4, 8, 16, 32, 64. The seventh trade stakes 64 to recover 63 of earlier losses and win 1. If it loses, the streak has cost 127. The strategy trades many small wins for one rare, very large loss, and the rare loss arrives on schedule. If you use it, set a ceiling on the single stake, limit the steps, and assume the full ladder will be lost at some point.
Cap the single trade
Any time the stake can change, set the largest amount one trade may risk. In Bot Forge this is the Never stake more than setting, and an escalated stake is also never allowed to be larger than the session's stop loss. A Martingale bot that would need a bigger stake than the ceiling stops with the loss instead of placing a smaller trade that could not win the streak back.
Take profit, and stop for the day
A profit target ends the session while it is ahead. Without one, a bot keeps trading until variance gives the profit back. The discipline that matters comes afterwards: when a session ends, on either limit, do not start another one immediately with a bigger stake.
Risk across several bots
Three bots on one account are one account's risk. If all three trade the same kind of contract on similar markets, their losing streaks can arrive together. FXNOD applies a combined loss ceiling to all the bots running on one Deriv account for that reason. Set your own total as well.
Questions people ask
- What is a good stop loss for a trading bot?
- An amount you can lose without changing your plans, set as money before the session. There is no universal percentage. A common discipline is to risk no more than a small share of the account in any one session.
- How much should I stake per trade?
- Small enough that an ordinary losing streak does not reach the stop loss. One to two per cent of the session's loss budget is a conservative starting point for a flat stake.
- Is Martingale safe with a stop loss?
- A stop loss limits the size of the disaster. It does not change the fact that the strategy is built around one. The check runs before each trade, so the last doubled stake can take the session well past the stop loss.
- Should I run a bot without a profit target?
- You can, but then the stop loss is the only exit the bot has. A target gives the session a second way to end.
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