Monday, June 8, 2009

Testing Every Expert Advisor, The WRONG Strategy !

Throughout the last year, I have seen several new expert advisor review sites come out to test the many new commercial expert advisors released every. I have to say that despite the good intentions of most of these review sites and the honesty and effort done by their creators, most of them have a totally wrong focus in the testing and evaluation of forex automated trading systems. In my opinion, the successful testing and use of automated operation systems has to be done with the expert's logic taken into account and most if not all of these review sites totally neglect looking at the logic of the different expert advisors.

Their testing logic usually consists of taking a commercial expert advisor, (regardless of it's logic) and testing or trading the strategies, putting them to the test on either a demo or live account. The consequences of this is that a lot of effort is put on testing expert advisors which have a logic which is inherently flawed and designed for short term profits. In fact, there is the danger of making people act on short term results (which are sometimes very profitable) and make them risk their money on that expert advisor without even knowing the logic behind it or if it has the actual potential to be a long term stable profitable trading system.

In my mind, this is the totally wrong way to evaluate expert advisors. Not every expert advisor out there should be tested to prove or disprove its profitability. In fact, almost 9 out of every 10 expert advisors out there can be discarded in virtue of their trading logic. Moreover, the true trust and knowledge needed to trade with an expert advisor truly does not come from testing information but from knowing the expert's logic and having the confidence to trade the system even through periods of draw down. As I have said in a few posts, in order to trade with an automated trading system you require even more knowledge than the one you need to trade manually because not only do you need to know how to evaluate trading strategies but you also need to know which ones work in an automated environment and which ones do not.

The mere testing of the experts out there will NOT let you know which ones are long term profitable, which ones are prone to wipe your account and which ones are not. For example, martingale strategies can give you profit for even a year, then wipe all your profits and your whole account in few trades. If you want to learn more about how to identify long term profitable expert advisors as well as 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 !Justificar a ambos lados

2 comments:

Winter said...

Hi Daniel,

Is it possible for your subscribers to provide feedbacks on some of the free expert advisors you have mentioned so that it can be enhanced to further improve their performance or risk/reward ?

Daniel said...

Hello Winter,

Sure ! I always welcome feedback to improve trading systems. However you should consider that any modification should improve the performance of the experts during the last 10 years (just for a year or two will not work). Make sure you send any suggestions regarding the experts to my email :)

Regards,

Daniel

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