Thursday, November 29, 2007

Myfxovereasy, free expert advisor. A Review

Many of you may have tried to find a good free expert advisor along your quest for the perfect set. There are a lot of forums and websites that contain free expert advisors which you can download, use and test at your own discretion.

I have been back and forward testing a lot of this eas for the past two months, amongst the ones that I have tested, one has impressed me the most. This expert advisor is myfxovereasy, which I got here.

This expert advisor has a unique quality which impressed me from the first moment I tested it. It withstood almost five years of backtesting on 90% modelling quality. At the end, it showed profit and I could recognize the pattern a good expert advisor leaves on it's charts. The expert advisor does experience some large draw downs, almost 30% being the maximum but I liked the fact that it has a fixed stoploss which prevents a margin call, making this ea avoid this fundamental flaw.

I mean, this ea does not come without risk, it works on a 15 minute time frame (it trades a lot!), although it did well on forward testing too with a one hour time frame. I am inclined to say that for those people out there who won't suffer a heart attack because of profit/loss fluctuations this ea will probably offer an average 7-10% return per month over five years. In back testing it stood the test of significantly different market conditions and on forward testing it is imitating this behavior although I would need five years of forward testing to asses the real power of this ea.

Although I am not convinced enough to endorse the use of this ea as I would with an ea that had showed less draw down I would say that it would be great for the long term investor to have this ea investing a small amount of money (0.1 lots) each trade. This ea, is probably a very good candidate for our long investments. And hey, it is free, isn't it ?

Tuesday, November 27, 2007

Forex Expert Advisors. Do they work ?

The world wide web is now overflowing with different expert advisors. I do a biweekly survey in which I look for new expert advisors on google and ebay, often finding a dozen new expert advisors for each time I do my research.

Many of them do the same thing. They are usually targeted towards forex newbies who clearly don't have a substantial understanding of the way the market works and the way money is made inside forex . The expert advisors always promess to be a "set and forget" way of entering the forex market with massive profit.

When I first learned about expert advisors, I used to think they were a pretty straight thing. I mean, it makes sense. Mr. A is a successful forex trader and he puts his strategy in expert advisor M. I use M, hence, I'm using Mr.A's strategy, making me a successful trader by logic. Well... Not quite.

There are a pair of things that differentiate me using M from Mr.A. First Mr.A has probably been in the forex market for a while, he has something very important. Discretion. He knows when to execute his strategy, when to hold, when to tweak it, he knows and understands the underlying information that influences currencies. He could, in fact, put this into the ea to some extent but there is something he cannot put. He cannot program how he would react in exactly every market condition, how would he react to war, to news, to elections, I mean, he cannot put his brain inside an ea. So M, is an approximation to Mr.A's strategy, not a duplicate.

So do expert advisors work? To what extent? Which claims are true, which ones are not? First things first. When you buy an expert advisor, put some logic into it. An expert advisor that made something like 100% every month would make someone the richest person in the planet in 10 years starting with a hundred dollar investment. If it is too good to be true, it probably is. Every test can be faked, never believe more than 10% average profit per month. Simple. Also, search for reviews online, your best source of information is other people who have used it. No reviews, you don't buy it, simple.

When you do get an expert advisor which is not a scam and seems to deliver to other people what you expect. Do not despair while you learn how an ea works. I mean, at first, you would expect a 5% profit ea to deliver that every month. They clearly do not work like that. That 5% is just the average monthly profit. An ea is a very poorly constant entity, it will probably oscillate dramatically, making 10% one month, 50% the next, then a 20% draw down. I mean, they do this very badly.

So to protect yourself. Withdraw a percentage of your profit. Always and never, never ever put money into a loosing account. Those my friends are the rules of thumb.

Last but not least... Remember. The forex market is NOT a place to get rich quickly. It is a place to grow richness by constant learning and studying of the market. It is not a place for easy money (like if they were any!). Expert advisors are a tool of the trade, they can make you wealthy in the long run not this month or the next.

EUR/JPY MoneyMaker Expert Advisor Review

NOTE : The review written here is for an expert advisor different from the one I talk about in my free expert advisor portfolio. As a coincidence both experts have the same name.

Three months ago, I purchased what seemed to be an interesting ea called "MoneyMaker" (aren't they all!) which traded the EUR/JPY pair in what seemed to be a trending style.

The ea claimed amazing profits, in the order of several times (about 500%) your initial investment. It came with a money back, no questions asked guarantee, so I figured out there would be no harm in giving it a try.

Even from the beginning I started to dislike this expert advisor. It has no stoploss. You heard me. No stoploss at all. The maker claims that the ea "quickly" gets out of loosing trades. Which in real life, turned out to be a bit "not quick enough" for my taste.

I forward and backtested this ea. In backtesting, the ea showed periods of massive winning, taking profit on one of aproximately every 10 trades, with about 3 trades a year making the difference between loosing money and making a profit. But It wasn't as pretty as I make it sound, the ea in fact made loses throughout some years, some being quiet deep. The ea though, managed to not get a margin call in 4 years of backtesting (loses occurred though).

In forward testing, this ea freaked me out. I hate, I mean really really hate, looking at an account with an open order loosing money, no stoploss, no nothing. The ea (in a 500 dollar demo account) lost quiet a lot of money and made about 2 winning trades which were not the BIG winning trades but trades that barely equaled some loses. In reality you face a very big open draw down with this ea. With no certainty of it being profitable at all in the future.

What I liked a lot about this ea, was it's pretty simple money management tool. Although it is very misleading in telling you that that is the amount of money you risk. Because of the lack of a stoploss, the draw down you can experience is not known. And NOT determined solely by the amount of money you spend on buying or selling the EUR/JPY.

The good thing is that the creator is a totally honest business man (in my humble opinion). He refunded me the money, no questions asked, as soon as I told him I wasn't pleased with the ea's trading style. If your into this kind of scary trading style, give it a try in a demo account, see how it feels. If you don't like it, well ask for your money back. In my experience the creator will live up to your expectations.

For me, I do NOT recommend this ea. The trading style is too risky (subject to massive draw down because it lacks a stoploss) to be part of our ea portfolio. This type of ea, suits an aggressive trading style which I am not keen on.

Sunday, November 25, 2007

The Fx-bandit Expert Advisor, Review

I have been using the Fx-bandit expert advisor demo for about three weeks. The experience has been good (partially) and it has also let me realize the really bad things (in my opinion) about this expert advisor.

For the good side, fx-bandit has delivered, up until now, the profit margin it is supposed to give every month. Although one month is a very small period of time to actually test any ea, fx-bandit does some amazing trades and actually held profitable ones through the non-farm payrolls earlier this month (which is something most expert advisors do not do).

For the completely bad aspects, fx-bandit's stops are activated after a certain amount of time defined by a variable in the ea's configuration. So, if you place a trade today, the stoploss would not be effective until the time (in days!) given by this variable. This is a recipe for DISASTER ! It is not a question of if there will ever be a set of market conditions in which you will have a margin call before the stoploss becomes effective. It is a question of WHEN !

One of my core beliefs is that an expert advisor should be shielded from this kind of flaws. An ea should always have a stoploss which is effective from the time we enter the trade. It is only a question of time then, before the fx-bandit ea gives back all of it's profit to the market. As I have told you, not a matter of IF a matter of WHEN.

This is true of all similar expert advisors without a stoploss. It is never a question of "will there be a time when you will have a margin call" it is a question of when. This also explains why this expert advisor seems so profitable. It generates income through this excessively risky strategy, (in my opinion) then most likely gives it back in a single trade.

I do NOT recommend this ea, in my opinion, the trading style is just too risky to be included in our expert advisor portafolio.

Saturday, November 24, 2007

The Doubleplay Forex Expert Advisor

When I began my quest to find an expert advisor that did well in a broad variety of market conditions I was very confused by the overwhelming amount of expert advisors available. After reading and searching for reviews all across the world wide web I found what appeared to be a good and well recommended expert advisor. Hence, I bought the Doubleplay expert advisor.

The Doubleplay expert advisor is what appears to be a very solid and conservative expert advisor. It fits my trading style, having a 50 pip adjustable stop loss and also a risk management module which makes sure that I never risk more than 5% of my account on each trade.

I have been very satisfied with this ea. It has traded as promised and has delivered some profit throughout the three months I have been using it for. I have obtained about 40% profit, which hits a quiet high profit/loss ratio. Support has also been absolutely wonderful, every doubt or support question I have had has been answered promptly by Hal, who is the ea's creator.

As much as I like this expert advisor, bear in mind it is NOT a way to get rich quickly. If you ask me I would say that this expert advisor is a PROFITABLE expert advisor, but I would never expect more than 10% a month in ANY case. This was proved by this ea having almost doubled my account along the beginning of October and giving more than half back just a few weeks later.

I have complete faith in Hal's commitment to the Doubleplay project, with no doubts in my mind that his main goal is to be successful as we are, not to deceive his customers in anyway. Doubleplay also has a money back guarantee if you have two consecutive months of losses using the ea.

This ea is one of the few I do personally RECOMMEND with no ties whatsoever, neither as an affiliate or as a personal friend of the ea's creator. This ea would fit great as a conservative addition to our ea trading package.

This expert advisor can be found here.

Thursday, November 22, 2007

The Market and the Expert Advisors

As I mentioned in a previous post, expert advisors, (entities that deal with trades automatically) may never be tested in a satisfactory way for future performance. The reason why, as I said, was because there is no way an expert advisor may be tested to account for all future market conditions. This is mainly because the market is too dynamic, being a reflection of global economical aspects which as we know, change dramatically as time goes by.
As an example, I have prepared a monthly EUR/USD graph, showing the relationship between these currencies for the past years. As you can see there are a lot of market conditions. For example, the market conditions between 1998 and the year 2000 are mainly bearish, while the conditions between 2000 and 2002 are those of a trending market.
Now, here comes the pretty part. If you had forward tested an expert advisor for a year between 2000 and 2001 and that expert advisor did very well in ranging markets then your results would have appeared to be very positive for that time. Your results may have even remained very positive after that (for a small while!).
Then, as market condition begin to change, your ea would have started to show negative results, probably killing your account somewhere along the next 3 years in which the market was amazingly trending.
It is clear to anyone now that an ea has to go through an amazing amount of market conditions. An ea may perform well in forward testing or backtesting. This DOES NOT imply that the ea will perform well in the future, it just means that it did perform well somewhere in the past and it may perform well again in that exact same type of market condition.
So the best way in which you can have positive results is by having several expert advisors that work on several types of market conditions. This assures that you will have small sustainable revenues in the long run. One to five percent a month. Anything else promised by anyone with a single expert advisor in the forex market is a pure lie.
I put it like this. If an expert advisor made 10% a month, you could be starting today with 500 dollars and having 5 million in less than 6 years due to compounding. Come on, market conditions would change far before you could get such a sustained revenue. The expert advisor would die in the process.
If you want long term sustainable profits in forex, aim at one to 3 percent a month with several expert advisors to compete in different market conditions. If you want to get rich with forex quickly, please go to Vegas. At least the drinks are free :)

Tuesday, November 13, 2007

Forex Expert Advisor

As many of you may already know, an expert advisor is an automated trading tool which makes all relevant trading decisions in the forex or any other trading market based on some technically driven trading rules.

In the forex market, expert advisors are usually programmed using the Metaquotes language in the Metatrader program. Metatrader can be obtained free of charge and used to test drive expert advisors in a demo account.

Testing expert advisors in a demo account is denominated "forward testing". The results are dependent on the amount of time the demo account is ran and as such, this approach is long. Taking years to obtain relevant results from the market.

Since expert advisors are a relatively new technology, the existence of this long forward tests is not common. People usually rely either on backtesting of expert advisors (which can be very unreliable depending on the software used and the testing data and condition), which involves testing the expert advisor with limited past market data, or very limited forward testing results usually ranging from one month to a year.

Non of these approaches makes an expert advisor or EA realiable or ensures that you will be making any profit in the future. An EA can have very positive forward testing for four months and then massive draw downs for, say, a year. This is because the EA has to be tested in a very wide range of market conditions. This conditions are thought to be cyclic and may require years or decades to be established. Thus, an expert advisor may need years to complete was is believed to be a "market cycle" and prove profitable. This however, is based on the hypothesis that the market is perfectly cyclic which is not entirely true as the market tends to change dramatically to unprecedented conditions from time to time.

So as you can see, there is not much hope in describing the performance of an expert advisor in such a way that it may serve as a criteria for profit making. This does not mean that there cannot be a profitable expert advisor, it just means that this EA cannot be known easily.

What I know, for certain, is that a profitable EA will mimic the decisions made by the bulk trading community a priori. This EA should in fact, decide what everybody decides. An EA should do what the majority of people are doing. The problem is that people's trades are based on a wide variety of things, including things which the expert advisor does not know. This puts the EA on a disadvantage as it cannot base it's decisions on the news until they are reflected on the price, which puts it after the move, not before it.

Hence my friends, the only sane way to profit from expert advisors is to follow the next simple rules for picking and using them.

- An expert advisor should show positive results in forward testing (as I have stated before this is necessary but not sufficient for an ea to be considered profitable)

- An expert advisor should nor promise more than 20% profit with a 5% risk. (Any promess beyond this causes serious doubt as by the limits of it's nature, an ea cannot maintain such wins without loosing eventually almost or all it's profits)

- An expert advisor should NEVER risk more than 5% of an account per trade. (this is basic risk management, a necessary tool for survival in the forex market)

- An expert advisor should ALWAYS include a stoploss. Preferably a stoploss shorter than 100 pips. Having no stoploss is a recipe for disaster. An EA does not know extreme market conditions and any sudden movement due to rare events could wipe your account.

- An expert advisor should NEVER trade by itself. Having only one expert advisor is unwise, if you are going to use them, use as many as 4 or 5 which meet the above shown criteria. Remember, don't put all your eggs in the same basket. Also try to use different types, for different currencies and market conditions.

- An expert advisor SHOULD require no human intervention. It should be able to trade by itself. If you need to change anything, then why bother calling it automated trading ? The expert advisor should not require any expert assistance.

- Ideally, an expert advisor should be updated regularly by its creator in an attempt to adapt to market conditions and increase profits.

This guidelines (which will be updated from time to time) are the base of my criteria for picking an using expert advisors. Stick to them an you will have a much better chance of succeeding in forex automated trading. Don't follow them and you will have almost no chance.

I will write a new post for each expert advisor I will start testing on this blog.

Monday, November 12, 2007

New Forex Finance Blog

Hello dear readers. Today is the beginning of this new finance blog dedicated to the ever growing forex market. My objective with this blog is to guide you through all the different aspects of the forex world. My page will include reviews of the following topics :

Expert advisor reviews
Broker reviews
Tips on the forex market
Manual trading strategies

I will, however, focus a lot on the review of expert advisors. I have not seen any webpages on the internet that really treat the review of expert advisors deeply and consistently, so I figured out this would turn out to be a really achievable goal. I also want to tell you that I will NOT , under any circumstances, become an affiliate of any of the expert advisors I will review as this may cloud my objective judgement of their performance.

I will post religiously three times each week. This should provide an insight on both the expert advisors I will be testing, brokers and any other comments I would want to make on the forex market. Feel free to comment and I hope you enjoy this blog in our mutual quest for a profitable money making experience in the forex market.

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