EA Risk Controls: Building Safety Into Automated Strategies

[FXS Prop Desk]

An EA without risk controls can damage an account quickly when something goes wrong. A few controls cover most failure scenarios.

Essential controls:

• Maximum daily loss: stop trading after a set loss.
• Maximum open positions: prevent runaway order loops.
• Spread filter: no entries when spread is above a threshold.
• News filter: pause around high-impact events.
• Maximum lot size: cap regardless of calculation.
• Kill switch: a manual or external way to stop the EA immediately.

Testing these controls is as important as testing the strategy: simulate a disconnection, a spread spike, and a calculation error.

It also helps to log every time a control triggers. A spread filter that blocks trades every morning, for example, may indicate that the EA is trading at the wrong time of day.

What safety features do your EAs include?

[Shadow Trader]

Maximum open positions does not catch every runaway loop. I once had an EA open and close the same trade 40 times in two minutes because the exit condition was already true at entry, and it never held more than one position.

So I count orders sent per minute as well, with a hard stop at five. When it trips, the EA disables itself and writes the reason to the journal, and it stays off until I reset it by hand.

The daily loss check should use equity, not closed balance. A limit based only on closed trades lets an open loser run straight past it, which is exactly the case a prop rule punishes.

For the news filter I have the opposite worry. If it relies on a downloaded calendar and the download fails, the safe default is no trading, yet a lot of code I have seen falls through to normal behaviour.

My kill switch is a terminal global variable that every instance checks on each tick. Setting it from one script stops all of them, which beats closing six windows during a fast market.

Spread spikes are easy to test with a custom symbol built from recorded ticks. How do others simulate a disconnection in the tester?

[Shadow Trader]

The daily loss check needs two levels below the firm's limit, not one. When the EA closes everything at the limit itself, slippage on the exit can carry the account through it, and a breach by a few dollars counts the same as a big one.

img_13766_r2.png (81.26 KiB) Viewed 2 times

The chart lays this out on an invented day against a 4 percent daily limit: new entries stop at minus 3 percent, open trades are closed at minus 3.5, and the forced close fills at minus 3.7. That leaves 0.3 percent spare.

The gap between the levels should come from the worst exit slippage in the logs, not a guess. On a 100k account trading 3 lots of EURUSD, 0.2 percent is about 7 pips of slip, which is plausible in a fast market.

On disconnection, the closest I have got is a demo account on a VPS where I block the terminal with a firewall rule for a few minutes. That shows whether the EA notices stale quotes and refuses to trade on reconnect, which the strategy tester cannot reproduce.

I also compare the last tick time with the server clock and pause entries if the gap passes 30 seconds. Does anyone also keep server side stops on every position in case the terminal itself dies?