The biggest mistake I’ve seen people make with Forex Megadroid is over-leveraging i.e. risking too much. Then when the inevitable 50 to 80 pip loss happens, the dollar loss is way bigger than what they expected and then they lose confidence in the strategy and stop trading.
I think part of the reason for this mistake is related to the win-loss characteristics of the Megadroid strategy itself.
Traders trading stocks or forex manually typically place a trade with a 1:3 risk-reward ratio. That means they’re aiming for a profit 3 times that of their maximum loss. If they achieve that with an acceptable win rate – say above 60-70% – over time they’ll be profitable.
With Forex Megadroid the risk-reward ratio and % win-rate are totally different. Megadroid has an average risk-reward ratio of about 4:1. That means the losing trades are on average about 4 times the size of the winning trades. The reason why Megadroid has been profitable is because it has a high % win rate. In the past the win-rate has been as high as 90 to 95%, depending on the broker.
Megadroid needs this high win-rate to be profitable because of it’s high risk-reward ratio. The common trap is to see 10 winners in a row and think “this forex robot will never lose” and increase the lot size. Big mistake.
My approach is to optimize the upside (primarily with proper broker selection to maximise the % win-rate) , but also to protect the downside, by constantly being aware of how much money I’ll lose when the next large losing trade happens. The big losing trade will happen, it’s just a question of when. Make sure you’re prepared.