Wednesday, April 29, 2009

Forex Trading, The Hardest Easy Money You Will Ever Make

Reading today some reviews on the website I found a review about a forex product which gave an excellent quote about the forex retail market. The reviewer talked about how he had to spend 6 years of learning before he could start looking at gains from the forex market and he said that trading was the best business in the world and that it is the hardest easy money you could ever make.

Nothing is closer to the truth. After being an active forex trader for several years I have to recognize that I started like almost everybody else does : with the promise and dream of making a lot of money within my first year of trading. Well, that never happened, as 90% of forex retail traders, I too, wiped my first live account clean. But hey, I knew some people were making money off this thing and I wanted to make some money from it too ! So I decided I would do whatever it took to reach a profitable level in forex trading and more, I wanted to reach a profitable trading level in forex automated trading.

Then I discovered, as I have said on previous posts, that there are no shortcuts in forex trading. If you want to be on that top 5% that makes a living from the market, you have to show why you deserve it more than the other 95%. That took me many hours of learning. Learning what expectations were realistic, learning technical analysis, fundamental analysis, macroeconomics, learning to program mql4, learning many many things. Moreover, I had to spend many hours looking and understading indicators, what the hell does a MACD really tell you ? how is it calculated ? What do all those lines really mean ? And finally, I started to make some profits of the market.

That guy that wrote that review really nailed it. The money I have made from forex trading has really been the harderst easy money I have ever made !

If you would like to learn more about the free and commercial expert advisors I have traded and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Tuesday, April 28, 2009

Forex Ambush 2.0 an Unbiased Review

This is the first signal service I have ever reviewed in my webpage. The reason why I decided to evaluate this service is because I have been asked by several of my customers to take a look into it and give my honest opinion. I have spent the past two hours checking the website, it's trading statements and it's claims and now I have a well founded opinion I am going to share with all of you about what they say they can achieve.

First of all, the service offered by this company seems to be your regular forex signals with the additional twist that you can also trade them in an almost automate fashion using fxcm. The first red flag comes when you first enter the website and it shows you those absurd profit claims with an additional "no loss" claim. I mean, "no loss" ? really ? Do they really want to convince us that they have a system that never loses ? Sure ! They do have live statements that show they have never lost. But please remember, there is a very important difference between a system that hasn't lost and systems that never loses. This difference is that the second type, does not exist.

After reading all the FAQ, claims, etc, I decided to take a look into the live statements which usually give me a very good idea of how the system trades and it's possibilities for long term profitability. What I found ? Exactly what I expected. In my experience, systems that claim to never lose are often associated with a lack of stop loss. To my surprise, this is exactly the case with this system ! Why does it never lose ? Because the system's stop loss is the whole account balance !

Since the system places no initital stop loss but does have a trailing stop, if the system ever goes directly against the trader by an amount of money equal to the trader's starting balance, the trader will have his account wiped out. Trust me, this will happen ! It happens to all this type of systems because the mean reversion theory eventually fails, specially when something causes a sudden, very decisive change of direction. So in my opinion, this system is absolutely not worth buying because it is not based on sound trading principles and it does not aim to preserve capital, the system fails to clearly explain the risks of forex trading and fails to explain that little detail of having no stop loss within it's logic. So I hope we all escaped from the ambush !

Anyway, thank you very much for stopping by and reading this review. If you would like to learn more about commercial and free automated trading systems I have traded and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Monday, April 27, 2009

Forex Expert Advisors : dnafxtrading , an Unbiased Review

Usually I try to write reviews about products that are of interest to my website viewers and customers. I try to write about the expert advisors out there that people are most likely to come across and other products I consider to be good, etc. This time, I write this review because someone has spammed my website for the past 2 weeks to the point of making me specially angry. I really don't know if it is the web master or simply someone who is extremely curious about this website but hey, I know spamming when I see it and this person was simply trying to get some links across to his or her website. Well, that person may now stop spamming my blog because I decided to write a review about the ea offered at the website.

At first, this ea selling website does not seem as elaborate as most of the more commercial expert advisors. I mean, it seems like a programmer tried to market it, not a truly proffessional marketer who knows how to make people buy things (websites like fxkiller, fap turbo, forex funnel, are all evidently produced by proffessional marketers). So ok, the website does flash some absurdly high profit values like 50,000% since 2001, but ok, I always give expert advisors an opportunity regardless of what the creator has to say about them. I'll look at the trading statements myself and give my honest opinion about them.

First of all, the seller should not make claims of such high profits based only on backtesting reports. The seller should explicetely say that those results are per the backtesting that has been done, otherwise, people could be confused and imagine that these results are actually real. Now, as per the backtesting, the ea does include a stop loss, it does trade with orders separated more than 20 pips from the entry price and it also has average profits above the average losing trades. These are all positive signals for the expert's logic but still, backtests are done with the benefit of hindsight so they should not be taken in so lightly to evaluate an expert's profitability. People that have read my ebook on automated trading know that my criteria is far stricter and requires forward and live testing.

The creator does seem to provide live testing information updated in a live fashion but he or she fails to provide us with investor access information. How do we know that trades are in fact made by the ea and that the statements are not manipulated ? That would be the only way. But ok, if we assume that the seller is honest and we are looking and genuine trading results, they are still too few to consider the expert worth buying. Ok, the creator has posted live statements and that puts it in the "may be worth buying at some point" so we will let this ea run for at least one year before we decide if it's live trading is consistent with it's backtesting information and the software is in fact worth purchasing and worth trading. (this EA has been reevaluated and it's status is curently NOT worth buying, a revised review has been published in 04/08/2010 to consider third-party verified live tests provided by the creator)

If you would like to learn more about other commercial and free expert advisors I have tested and reviewed as well as more in depth information about how to choose an automated trading system please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Sunday, April 26, 2009

Forex Expert Advisors : Forex Funnel, an Unbiased Review

Today I am putting my thinking cap on again to review another forex automated trading product by request of my customers and website visitors. This time, the product I will be reviewing is called forex funnel and is offered at I think this expert advisor is a perfect example of all the things I abhor about forex expert advisor sellers.

A first look at their website reveals that they are targeting the easiest prey : new forex retail traders which don't know nothing about automated trading systems and are looking for a fast way to increase their capital. The website makes absurd claims, making excessive amounts of money from very small initial investments. To me, this site is completely unethical. It never explains the risks of forex trading (oh yes, they do have the disclaimer at the end of their page in font size 2), the unreliability of backtests, etc.

Now, to add insult to injury, they do not show any realiable evidence of their claims. Their best evidence is a backtest which I can beforehand say is a consequence of one minute interpolation errors. In fact, all backstests that show this type of profit are an exploit of backtesting failures (that is my experience until now). This website treats us like we really don't have the slighest idea of what we are doing and are not even intelligent enough to look for live testing information. This expert advisor is light years away from being worth buying. I would expect at least, as with any other expert, live account statements with investor access.

Again, I am very glad I can express my opinions on these ea sellers who try to sell us systems that are unproven and that will most likely wipe out our trading accounts. They should treat us like investors and not like lottery ticket buyers. Tell us the reward, the risks, the reality, please don't insult our intelligence.

If you liked this review and would like to learn more about commercial expert advisors I have bought as well as free expert advisors I have traded and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Saturday, April 25, 2009

Constant Volume Charts (Tick Charts) Using Metatrader 4

Many of my ebook and newsletter customers have emailed me about the post about tick or constant volume charts I made a few weeks ago. It seems that there is a great interest to learn how to trade and use this type of charts but most people use trading platforms that do not allow this to be done. In particular, most of us use the metatrader 4 platform to trade the spot forex market and this platform in particular does not allow volume charts. The reason why metatrader does not have this functionality is because the program itself does not store tick data (which is vital for the construction of these charts). However, by exploring the web a lot, I have been able to find a practical solution to our problem.

By using an indicator that saves ticks and an indicator that then plots them according to a fixed amount or volume per bar, you can generate tick charts on metatrader 4 completely free. At the end of the process you will have a chart that can be used for the same things as a time chart, you can drop indicators on it, expert advisors, etc. The main draw back with this approach is that only forward charts can be drawn because metatrader does not have any previous saved tick data. I am working on importing tick data for long periods of time so that we can at least visually backtest strategies using constant volume charts. Anyway, the whole process is better explained by the following video. I'll be waiting for your comments !

If you want to find more about commercial and free automated trading systems I have tested and reviewed as well as which experts I am actually trading please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Sunday, April 19, 2009

Why Scalping and Scalpers Do NOT Work

I am really amazed at the amount of people out there trying to make themselves rich by using scalping trading systems. Scalping is one of the trading techniques I dislike the most and this is because scalping is based on very odd and unsound trading concepts. There are many reasons why scalping and specially scalping expert advisors will not work in the long run but I'll try to explain the most important factors that definitely hinder a scalpers profitability and make it long term unprofitable.

First of all, what is scalper ? A scalping strategy is defined by most brokers as a strategy that either takes a profit of less than 5 times the spread of a given currency or a strategy that closes positions in less than 5 minutes. This definition is quiet wide and in general includes trading strategies that try to catch very small profits in the market (hence the word scalping). Most traders think that it is easier to catch a very small profit in the market than a large one because the market tends to move in random directions on small time frames.

So what are the problems of scalping strategies ? Well, I´ll write a small list and discuss each point so that you can see why any scalping ea or strategy is finally doomed to fail.

  • In order to get that small profit, you usually need to risk much more. This of course is a consequence of the movement being random. You want to take a profit but if you place your stoploss at the same distance then the same randomness might as well take you out with a losing trade. The solution is simply to make the stoploss higher than the randomness, that usually means risk to reward ratios high, usually from4:1 to 400:1.
  • There is no way to predict that randomness consistently. This is because the things that rule that randomness are not predictable, they are of course, random factors which cannot be accounted for. This translates in indicator signals becoming completely useless form one time period to another. So for example, a scalper may be profitable from 2000 to 2001, then it is not anymore. It is impossible to make sense of the randomness (do it and you'll get a Nobel price in economy) and it is even more difficult to write a set of rules for it that work long time. Hence, your scalper will fail and you can take that to the bank.
  • Spreads affect scalpers a lot. Because the take profit is so low, changes in the spread have a drammatic effect on the system's profitability. So the system maybe working and then the broker widens the spreads a little and you are absolutely doomed to fail.
  • Your very high risk to reward ratio makes the system very vulnerable to losing trades. In fact a few consecutive loses are enough to wipe out an entire account in some cases and in other cases the loses take months to recover because of this same factor.
  • Your trading cost is too high ! You trade for 100 times a day or for 10 times a day, you are working for your broker. This is because you are just paying at least 200 pips a day in spreads to be on the market. This is extremely high !
  • Finally (this is not a valid reason for unprofitability but it is something I want you to take into account) none of the people I know who have made significant amounts of money in the forex or futures market has ever done it by using a scalper strategy. Scalping is a fool's strategy (for all the above reasons).
So, all these points should have made it quiet clear. Scalping strategies will not work for the long term because they are based on something that is random and the rules that predict where that randomness is going change (you guessed?) randomly. So, if you really want to be a profitable forex trader (in the long run) look for long term stable profitable strategies that are based on what determines long term trends (these rules, on the contrary, do not change because the long term trends of the market are based on fundamental aspects of the currencies).

If you would like to learn more about this type of strategies as well as other commercial and free expert advisors I have reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Saturday, April 18, 2009

The Effect of Spreads on Expert Advisors

One of the most important characteristic of any expert advisor is the effect spreads have on the profitability of the trading system. This is a matter that is often neglected by people when they are searching for an expert advisor and it is a vital issue as an expert advisor that is very sensitive to spread values will most likely fail or have a drastically reduced profitability when you trade it on the real market.

The spread, as you may know, is just the difference between the bid and the ask price of a given currency pair. This is in reality what the broker charges as a "commission" given the fact that the broker always keeps this price difference as profit. Every time you enter the market you give the broker the spread as payment.

So how do you know the spread cost and the sensibility of a given strategy to market spreads ? The first factor that affects this is the number of trades taken. If a given ea takes 1 trade each month, then the cost we have to pay for trades is very small, while the cost we have if we take 10 trades a day is quiet high. The more you trade, the more your ea is working for the broker and not for you.

The second and most important factor is the average profit in pips of each trade you take. If your ea has a fixed take profit which is less than 5 times the spread, then changes in the spread will drastically affect the amount of profit you get with each trade. So if you have a 10 pip take profit and a spread of 2, then the expert might be totally unprofitable with a spread of 5.This is specially true if the risk to reward ratio is higher than 1, that is, if the stoploss is bigger than the takeprofit since not only are you working against the spread, you are also risking much more than you make in any trade. This is a pretty unsound strategy but it is used by most of the hyped commercial expert advisors (like fapturbo, robominer, piptronic, etc).

Now pay a lot of attention to the currency pair your expert advisor trades. Most of these expert advisors that aim for small profits are now targeting currency pairs that are characterized by high levels of volatility and range trading (like the EUR/GBP and the EUR/CHF) their pip value is also higher than that of USD based pairs so the profit they can get in dollars for every pip is higher. The drawback is that this pairs tend to have very variable spreads and all of these experts are bound to be unprofitable when traded in the real market. That is a reality.

If you would like to learn about more commercial and free expert advisors, as well as experts I have programmed for our long term stable profit portfolio please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Thursday, April 16, 2009

Simple Moving Average Crosses as Profitable Trading Systems

As you may know by now, this week I have been dedicated to finding profitable simple trading systems. One of the first trading systems that new traders are exposed to is the moving average cross. A moving average is simply a line drawn on the screen that reflects the price average of the past x number of periods for each bar. A moving average cross strategy is simply entering or exiting the market when two moving averages cross or when price itself moves above or below the moving average.

Why does this make sense ? The moving average cross strategy makes sense because what it basically implies is that if the price is moving above it's average, then price should be increasing and vice versa. The same when you trade the cross of two different moving averages. If the average of a small number of periods is above the average of a bigger number of periods then this means that price is increasing and so forth.

But well, things are not that simple. The problem with the moving average strategy is that the price movement needs to be long enough in order for the lagging quality of the indicator to be minimal. Since the moving average lags the market because it takes time to react to market moves (because it is an average of past periods after all), then if price movements are too small you will always get in too late and exit with loses. This is why moving average strategies fail to work long term on all the smaller time frames. In smaller time frames, trends are not long lasting and they quickly reverse, whipsaw and send us a bunch of mixed and false signals which make the strategy a losing one.

So where are moving averages profitable ? Well, higher time frames with very slow moving averages are the greatest because you catch extremely large market moves (sometimes even 2000 pips !) and you get very few trades, about one or two each year. This strategy greatly diminishes the amount of money you pay in spreads and guarantees a long term stable profit. This strategies can be easily traded with the unviersalemacross ea found at forex-tsd which let's you trade ma crosses.

Below you can see a backtesting chart for the EUR/USD, the GBP/USD and the USD/JPY (from 1999, on daily charts). This strategy is very good and really catches those year long market trends. Modelling quality is n/a because of some chart mismatch errors due to volume but again, the erros of this backtesting are almost none because we are trading very long term, in fact, you can easily visually backtest the strategy and see that the results are indeed what they are.
Even though this strategy has long term profitability and has a few trades every year, most traders will never even consider it because they still think that 20-50% is a real profit target in forex automated trading. If we look at the trades of the EUR/USD (200 slow ma and 20 fast ma) we see that each trades takes an anormous amount of profit. In fact, the average win is more than 5 times the average loss because of this. Below you can see a sample trade with the moving averages drawn, on the next chart you see a higher time frame (weekly) in which you can see how the ea caught all the long term trend perfectly.
This system can generate you a profit of about 40-50% a year with a draw down not exceeding 30%. Again, even though this is better than the best fund managers in the world, most retail traders (most of them not being profitable) will argue that this profit target is too small for them and that they "know" that that quantity can be made in a monthly basis. This is true, a person can make 40-50% for a month or two, but the market exposure needed to make this amount of money will wipe the account. What I aim for is constant, consistent, stable, long term profits. I do not mind trading 2 or 3 times a year, in fact, I consider this better than entering positions everyday.
If you want to learn more about other commercial and free automated trading systems I have used and reviewed as well as expert advisors I have programmed to follow long term stable strategies, such as the 4 week breakout, turtle system and the 8and8 system please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Trusting An Automated Trading System

Most forex retail traders start their journeys in the market by taking one or several different learning approaches towards trading. Most of these approaches involve either books, seminars or other forms of regular trading education. In my experience, there is a serious gap when it comes to the way in which most traders learn the basics of trading.

For one, it is impossible to learn most important things about the market in theory because the psychological factors that are involved in manual trading systems are never really learned until the trader actually experiences the market with his or her own money. People often think that all psychological factors are eliminate by the use of automated trading systems. This is not true, there are several important, emotional factors that are not experienced in manual trading that become important when using automated trading systems.

The gap comes when people start to try to use blackbox systems in automated trading. When someone uses a system that they do not truly know, even if the system is profitable, they are doomed to fail. This is because when you do not know what you are trading, you are bound to flee when the system goes into temporary draw down. But then, if the system is not really profitable and it goes into draw down and eventually wipes the account, the trader will become afraid of loses and he or she will quickly quit profitable system early later on.

The solution ? The trader should know the system and know if it is profitable by the merits of it's logic and the traders knowledge. The trader should understand the robots logic deeply and really know the reasons why this logic has long term profitability. The trader then knows the system, it's weaknesses and it's strengths, so the trader knows the draw down scenarios and for how long they are bound to last. So no, you cannot be an ignorant trader with no knowledge of the markets and be profitable in forex with an expert advisor. If you do not want to take a long time to learn about trading itself and maybe even programming if automated systems really interest you, then this is not the business for you.

If you want to become profitable using an automated trading you should then take a look at systems with very simple logic you can easily understand (weekly breakout or turtle system) and then start demo trading it and realize how automated systems work. If you also want to learn more about commercial and free trading systems I have used, reviewed or programmed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Wednesday, April 15, 2009

The Retail Trader and the Expert Advisors

It seems like yesterday when I first decided to use automated trading systems to become a profitable forex retail trader. My life was becoming seriously affected by me taking too much time to manage my forex market positions so this seemed like a great opportunity to enjoy a day job free life style without anytime taken from my schedule. Boy was I wrong !

There is no doubt in my mind that this are the thoughts going through the majority of the new people trying to start to make a living from the forex market using automated trading systems, mainly expert advisors. People, just like me, start in this world with the hope that they will find an easy way, without having to learn or intervene too much, to be profitable in forex trading. My friends, you couldn't be further away from reality.

I'll tell you what happened to me, in the hopes that some of you can cut a few steps. When I started with automated trading systems I decided to buy the "flavor of the month" so to speak, that is, the expert that had been making money for a month and everybody was hyped and talking about. To my surprise (yes, at that time I was surprised!) the expert advisor turned out to be completely different from what I was promised. After a few months, it brought my account to just a few dollars. And you guessed right ! I was angry !

Sure, that was a scam, but there should be another expert I could trust out there. It turned out to be, that most of the commercial experts out there, do not work. To my surprise, I ended up having to learn about triple of what I would have had to learn to be able to trade manually. On top of learning everything a manual trader needs to know, I had to get familiar with the mql4 language and start to really come in touch with what expert advisors really do and what can and cannot be achieved in the world of automated trading.

You really cannot cut corners in the world of forex trading, automated or not. There are hundreds of traders out there trying to catch that same dollar you are after so you really, really need a very sharp edge to get it. And trust me, a 100 USD trading robot does not give you that edge. The edge comes from knowing the systems, knowing their limitations, their strengths, knowing what draw downs to expect, really, really trusting your trading systems (something which is extremely hard to do with a system that you don't even understand and that comes inside a black box)

If you want to learn more about the free and commercial expert advisors I have used, reviewed and programmed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Monday, April 13, 2009

The 4 Week Breakout Strategy EA, a Very Simple Profitable Trading System

I decided to dedicate most of my last week's free time (which was not much by the way!) to try and find the most simple, profitable trading system I could use to trade the forex market. The truth is that I wanted to find a very simple, understandable system that I knew was long term reliable and that could be easily explained to new traders so that they could trade a consistent, profitable trading system they could trust.

Throughout my whole search, I decided to center on very simple trading strategies that work in the long run and give a good amount of profit (at least 30%) a year, with an acceptable level of risk. The truth is that I could not find that many systems and the only one that certainly caught my eye was a very simple 4 week breakout strategy that just centers on obtaining profits from a breakout of a 4 week high or low. The systems rules seemed very simple at first :

- Buy on a breakout of a 4 week high (close any shorts)
- Sell on the breakout of a 4 week low (close any longs)

This system is indeed barely profitable since you often give back most of your profit because of the exit signal, which of course lags the market badly since it is just the same as the entry signal (but reversed). I decided to implement a suggested modification which simply moved the exit so that the system would close trades on the breakout of a smaller number of days so you would enter a trade on the breakout of a 4 week high or low but exit on the breakout of a 1 or 2 week high or low. This greatly improved the system, but draw downs were still a bit pronounced since we were getting in at trades on tops and bottoms when we had ranging markets.
The solution that came to me then was pretty simple. Breakouts should not be entered as they happen but we should wait for price to be a certain number of pips past the breakout level to ensure we can enter a long term profitable trade. How many pips ? Well, this of course depends on market volatility so I decided to adjust it (and traded lot sizes as well !) as a percentage of the ATR indicator value. This of course guarantees that the ea self adapts to changing market volatilities. The results ? The backtesting curves you see for the past ten years for both the EUR/USD and the GBP/USD (modelling quality is n/a because of some chart mismatch errors in 2000 and 2001 but changes to 90% when tested from 2002). Notice that we get a small number of trades during the past 10 years with a very high probability of each trade being profitabe. Another interesting fact is that the average win is almost 4 times the average loss ! This of course speaks about the system tackling an essential characteristics of the market and not just tapping into randomness for profits to happen.

If you want to have access to this and other expert advisors I have programmed (if you just want this ea buy me a cup of coffee and I'll send it to you !) and read about other free and commercial expert advisors I have tested and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Sunday, April 12, 2009

Forex Expert Advisors : Forex Maestro, an Unbiased Review

I recently received a pair of requests from website visitors who wanted my opinion on the "forex maestro" expert advisor system. The truth is that I had seen the website sometime in the past and my opinion about it now is exactly the same as it was then. Who the hell do they think they are selling these products to ? I mean, each time I write one of these reviews and each time I enter one of these websites I get the same feeling. Are they selling us something to invest with ? Or are they selling us a lottery ticket ?

The forex maestro website is yet another example of very fine marketing applied to a forex oriented product. Your welcomed to the webpage with claims that say " You Can Make $2 Million With Currency Trading" . This by itself is a direct hint at the market group these people are aiming at. Every expert advisor that states such claims is obviously aimed at new forex traders who want to make huge returns on investment. The website is carefully engineered towards people who are new to forex and investing altogether. The story itself about the guy feeling "desperate" and then realizing how to "profit" during his sleep sounds just like it was written to make the traders sympathetic towards the author.

But well, I always try to give expert advisors a chance, regardless of their very ethically lacking selling techniques. At first, from the claims made on the website, the system sounds definetely like a "scalper", there would be no other way to attain such a high winning percentage except by having a very large risk to reward ratio. This in my opinion is far from ideal. We also don't even get backtesting information as to evaluate the trading strategy, or the possible consistency, relability, draw down and other aspects of the trading system.

With all that said, I consider that the forex maestro system is absolutely not worth buying. The creator should provide much much more testing information, including live account information with investor access and a good amount of backtesting. I consider it insulting and deeply unethical how this people try to sell a system whose evidence of profitability is absolutely lacking. Finally, if you wish to learn more about other automated and free expert advisors systems I have tested and reviewed
please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Wednesday, April 8, 2009

Expert Advisor Seller Responsability the H.S.R Criteria

For the past two years, I have been awed by the way in which forex expert advisor sellers take advantage of the ignorance of new forex traders. I have seen people selling expert advisors which are definitely a sure way to wipe out an account (and in many instances have done so), I have seen the hype, then the reality of the expert advisors.

In general, I believe that expert advisor sellers can be divided in two. The first group makes deficient expert advisors and sells them without the knowledge that they may be causing significant loses to people and the second group, which is almost criminal, that sells expert advisors to people with the knowledge that their product may cause account wipeouts. I know that the forex market is exceedingly risky and no expert advisor seller ever will be able to completely guarantee the success of his or her produts. But because of the amount of capital that is at stake here, I think that there should be a minimal standard for any ea that wants to be sold out to the public.

What I am proposing is a criteria for ea selling called the H.S.R, Honesty, Safety and Reliability. The criteria is a strict set of rules that needs to be followed in order for an expert advisor to have the best possible conditions for retail traders to experience. This in no way means that the ea will be profitable forever but it does mean that the ea creator thinks it will, to the best of his knowledge and that testing shows that the ea has been profitable in the past amongst several market conditions and that it has a good probability of being profitable in the future. The rules I propose for my criteria are :

1. The ea should be backtested with tick data (which is 99% modeling quality) at least from 2004, although longer backtesting should be preferred.

2. The ea should be live tested on a live account whose investor password is always available to the public and unchanged for a period of at least a year.

3. The above two items should be done with at least 3 different brokers in order to demonstrate that the expert advisor is broker independent.

4. The ea seller should explicitly indicate the maximum levels of draw down the account has experienced in the above tests as well as the average monthly return that could be expected.

If ea sellers around the world decided to follow my criteria, about 99% of the experts out there would be gone forever and forex retail traders could rest assured that the ea seller did all that was in his power to show that the ea is in fact profitable and that it can generate equity for it's customers in the future. In the end, there is no obligation from any ea seller to follow any set of rules while trying to sell an ea. In reality a few good marketers can sell a totally unsound expert to the new retail traders or the people who dream about quick richness but it really is not about that. It is about being honest, not about ripping people off. With my criteria you would know that your ea seller is honest, safe and realiable. I challenge all commercial ea sellers out there to fulfill my criteria and become examples in the world of automated forex trading.

If you would like to learn more about free and commercial automated trading systems I have reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Tuesday, April 7, 2009

My Turtle Trading EA - First Profitable Results !

After doing the first preliminary backtests and realizing that the system failed to generate profits from 2000 to 2009, I decided to take a good look at my programming and check the logic to see if I had any substantial errors that could be affecting the expert's trading. After examining the expert for about an hour I realized that I had a problem with the closing logic which was partially closing positions. The ea was closing with lot sizes equal to the atr calculated values, not the values the orders were orginally opened with, so order management was a little bit of a mess.

After correcting this and other less important issues I finally came up with an expert advisor that truly trades the turtle system 2 accurately. As I expected, results are now profitable for trading since 2000 to 2009. The expert is also profitable amongst several currency pairs, including the four majors.

Backtesting reveals that this system behaves exactly as I had supposed it did. We have periods of moderate but extensive loses and then we have very large, trend catching trades that consitute most of our profits. In fact, most of this profitable trades are many times larger than the average losing trade . Trying with different exit and breakout day parameters reveals that the turtles nailed it just right. This expert will not make anyone rich overnight, with the EUR/USD (first graph), you could expect to triple your capital once every 10 years while it would take you this much time to double your capital on the GBP/USD (second graph). If you want a system that has worked for the past 40 years and that can give you a long term, stable profit, then this is a system for you.
As you can see on the backtesting images, this expert advisor is a slow, steady, sure money maker, based on the turtle system 2. This expert also backtests with a high consistency because it trades only on very large periods of time (sometimes trades remain opened for several months). You can get it by simply subscribing to my newsletter (corrected ea has already been uploaded to the ftp for subscribers), buying me a cup of coffee or buying my automated trading ebook.

If you would like to learn more about other free and commercial expert advisors please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Why Forex Forums Cannot be Trusted

Throughout my whole experience as a forex product reviewer and customer I have always been interested in forex forums and discussion groups. At first, I almost trusted forums blindly, because they seemed to offer the honest opinion of honest retail forex traders. When time started to pass, I realized that forums and discussion groups are often a very bad source of information and are extremely confusing for new forex traders. There are mainly two reasons why I consider forums cannot be trusted and are not reliable sources of honest information.

1. Most people in forums do not know what they are talking about . Sure, there are people out there in forums who are very educated forex traders that are truly in to help fellow forex traders but most people out there giving their opinions in forums really do not know what they are talking about. Since giving your opinion in a forum is so easy, it is very easy for new people in the forex market to get misdirected by people they consider "educated" within the forums. There are several forums related with expert advisors in which people's advice is taken almost without hesitation, just because there is no one there to provide another, more knowledgeable point of view. My advice, be extremely critical about the people in forums, always take the time to consult with a proffesional regarding financial matters. Opinions given in forums are just that, opinions.

2. Many people have a hidden agenda. This is more dangerous than the first point because they maybe deliberate misinformation in forums when money is at stake. For example, a forum started to review and comment on expert advisors can mutate into a place where expert advisor sellers can camuflate and sell their products by posing as satisfied cutomers. This indeed, is quiet common and it attacks people where they least expect it. Because people think they are inside a safe environment where other traders give their honest opinions, this kind of people are the most detrimental to a forums success.

Should I stop using forums then ? Absolutely not ! Forums provide a very good place to share your opinions and thoughts with people who are in a similar situation. However, you should consider the above two points. Take everything said in a forum with a grain of salt and do not base your financial decisions on what people may say they have experienced on a forum. Forums are a great way of finding potentially profitable free trading systems and I frequently check them out to see if any valuable ideas are to be found.

If you would like to learn more about free and commercial automated trading systems I have found, tested and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Monday, April 6, 2009

Forex Expert Advisors : Forex Megadroid an Unbiased Review

During the past two weeks I have received a lot of requests to take a look into the new forex expert advisor "forex megadroid". To my surprise, you already find reviews floating around the net about this expert advisor's profitability. Well, I would like to say I am surprised about this but as soon as any product is launched you see a ton of people wanting the juicy referral bonuces offered by the product sellers. No wonder why people buy this things with such haste.

As almost all the time, I find the forex megadroid's website exceedingly cheesy. Well, it is obviously aimed at people who don't know almost anything abou the forex market, any experienced forex trader would not hesistate to exit the website after a general overview of the site's content. There are many reasons why I would never even consider buying this piece of software, but I'll start from the beginning.

First, backtesting evidence is no evidence of profitability. Yes, I know the website is designed by very good marketing people who want to make you feel like all the evidence is just a reinforcement of what is evidently true, the words and phrases are also designed to make you feel the creators are simpathetic towards you and will most definetely never try to rip you off, so most people will just watch the nice equity curves and buy the expert. But again, backtesting evidence is no evidence of profitability, there can be people who are very good at exploiting the one minute interpolation errors of the metatrader backtester or even exploit other critical errors of the software. So no, it is not good enough for me. Again, the burden of proof is on the ea creators NOT on our live accounts so let them give us a live account's investor access password and we will see if they can walk the walk.

Second, quadruple your money ? Come on. This is just common sense. I spoke to a fellow forex trader yesterday about this and showed him the claims and well, if I had an ea that could guarantee just 200% a year in profits I would defienetely become a fund manager and code that in tradestation to make good amounts of money. Why are they selling it ? Moreover, why are they selling you something that is not proven on live account we can access, see and verify ? The answer is obvious and the fact that they have the courage to try to sell something that is not very rigurously tested and verified just horrifies me. I mean, if I was selling the forex megadroid I would not be able to sleep at night, but then again, it seems that would just be me.

Broker manipulation. Yes, broker manipulation happens, but what systems do broker manipulation hurts the most ? Systems that rely on very unsound forms of trading. Like ripping very small profits from the market with huge risk to reward ratios (again, another point I do not like about this expert's trading). Brokers generally do not have anything to do against long term sound system strategies like (in my opinion) the strategies used by God's Gift or DTS-1.

So, in my opinion, the forex megadroid is not worth buying. I know that the author's claims are exiting and that we as honest people, tend to believe that other people are also honest but, we need to be a little bit scientific here. We need evidence of profitability and of every claim they are making. They say every market condition ? Broker independence ? Quadruple your money ? Then we need at least 20 live accounts on 20 different brokers for one year, accounts we have the investor passwords to and that we can confirm are running the ea 24/7, then we will start to believe their claims.

Again, as I have said many times, if it is too good to be true, then it probably is. Don't get hyped, don't buy something that is not rigourously proven, do not let someone's claims cloud your judgement. We all want to make money in the forex market, but stay calm, let them prove their claims. Up until now, the forex megadroid fail to deliver enough proves to backup their claims, therefore, I consider their software NOT worth buying. If you would like to learn more about other commercial and free systems I have tested and reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

The Turtle Trading System EA - Trading the Turtle System II

After searching a lot for an expert advisor that had the exact same rules of the turtle trading system, I found out that all of the free experts out there that try to trade the turtle system differ from the rules in one or another way. Since this system has the reputation of being profitable and very mechanical, I decided to give it a shot and program my own version of the Turtle trading system following the turtle rules to the letter.

Well, I programmed an expert advisor to follow the rules of what the turtles called the trading system number 2. My ea does exactly what the turtles say it is supposed to do. It enters trades on 50 day breakouts, places stops at 2N and then enters an additional of maximum 3 positions in 1/2 N intervals with the N equations defining lot sizes so that the amount of capital risked is also adjusted to volatility (as the system says). The system exits trades based on a 20 day breach as it is also described by the system.

Now, I would have expected this trading system to lose most of it's trades and then show tremendous recoveries on a few trades each year. That is exactly what I observed in backtesting with the small difference in that the big wins experienced during the trending periods were not enough as to compensate for the huge loses suffered from all the false breakouts experienced by the system. My ea newsletter subscribers will have access to this ea from today, so make sure you join my newsletter if you would like to test this ea yourself.

Right now I am trying to find additional criteria that can be added to the ea in order to prevent the ea from losing most of it's profits on false breakout trades. My best guess is that breakouts need to be further filtered out by the use of an additional indicator which reduces the number of false signals experienced by the system. Make sure you leave a comment if you have any ideas !

I found out that the lack of profitability I was observing was due to some programming glitches, make sure you read my latest post to see the first 10 year profitable backtests of this system !

If you would like to learn more about this ea and other free and commercial expert advisors please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Friday, April 3, 2009

Tradeways, Pallada 3.4 System an Unbiased Review

One of the systems I have been asked the most to look into was the Pallada system made by the tradeways company. I had not written a review about it before because the semi automated nature of it made it much less systematic to test and trade but after getting to know this system for a couple of months I think I can now confidently give my honest unbiased opinion about it.

The system has many indicators to it and it also has several entry and exit criterias. My first impression about the indicators is that, even though they are nothing that I would consider revolutionary, they do put a lot of information consistently on the screen. My best guess would be that some indicators are oscillator based while others are certainly based on lagging indicators of some sort. The Pallada system has the virtue of putting you inside all the winning trades with the outmost deffect of making you give most of your profits back on large moves when quick retracements happen.

Another fact is that having several possible exit criteria leaves a lot in the mind of the trader. Which criteria you use and how you actually handle your positions makes the difference between trading Pallada profitably or failing miserably. Of course, this kind of thing is what precisely makes the Pallada system impossible to fully automate. I coded an ea based on the exact entry rules given by the Pallada manual and I realized that things changed enormously depending on the exit criteria, but regardless of what I did, most of the time I was giving back all the money I won on the big trades on the ranging periods that followed.

In my opinion, the Pallada system is not a bad trading system. I know people who trade their indicators and are successfully using them to make money. Now, this system has performed very good for the past year (according to my backtesting using the ea I programmed) so you should not expect bad comments from people who have been recently trading the system.

Anyway, I think that the Pallada system is far from a "sure" solution that you can follow blindly and become profitable. The Pallada system reflects the nature of the trader, if you are profitable with their system, then you will most likely be profitable with other good manual trading systems. If you are not, then you probably need to work on your trading. Needless to say, there is no way in which you can make money in the forex market without having a decent education about it.

The Pallada system gives it's users a good opportunity to become profitable in the market. It is not a blackbox solution, it is a tool to help forex traders succeed. If you prefer automated trading solutions and would like to learn more about profitable free and commercial expert advisors please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

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