Wednesday, August 12, 2009

Forex Expert Advisors : Forex Poison an unbiased review

After yesterday's review I believe today will be forex poison's turn. As I said yesterday, a website visitor pointed me in the direction of this expert advisor and asked my opinion about it. In order to help that person and all my other website visitors to better know this trading system I decided to write a review about it after a very careful study of all the evidence shown on their website.

First of all, I would have to say that the forex poison case is rather peculiar because there is in fact a lot of information about the system on the selling webpage so there is a lot of information we can use to evaluate the actual trading of the expert advisor. The first thing we are shown is actually a collection of two "live statements" which apparently show the expert trading since May, 2009. I have to say that sadly we have no way of proving that these statements are real and not made up because we have no investor access to the accounts, therefore lets pretend the seller is honest and analyze the expert's trading.

The expert's trading is quiet strange, although I could still notice several interesting aspects of it. To start, the expert has an unfavorable risk to reward ratio of about 5:1 in most cases although it can be worse depending on the trade since apparently the TP value is not assigned at the beginning of the trade but is generated as the trade progresses in some way. I say this because there are some trades that go to the SL and close without ever reaching the TP. There is also a considerable change in lot sizes during the past month which is something very curious because there is an almost 10 fold increase in risk. I mean, if one of the last trades would have ended up in a loss it would have wiped out a very good chunk of the profits. My best guess is that traded lot sizes were increased to try to make the system look more profitable if it has a winning streak, which is something I have seen done in the past to have better results to show.

However the most interesting part comes when we look at the rest of the information on the website. We see backtesting results at 90% modeling quality with NO loses. Hey, this just SCREAMS one minute interpolation errors or in another way, it could mean that there was a total absence of a stoploss in the tests. Also, why is the backtesting so reduces ? Why isn't the backtest the same as the live testing period to show consistency ? Why isn't the backtest from 1999 if the expert can adapt to any market condition ?

Obviously, if the expert has huge one minute interpolation errors because of it's logic there is no point in showing backtests from 1999 because they would just be meaningless. This of course, leaves us with almost no tools to evaluate the EA since forward and backtesting cannot be related. However, I could say that the actual risk to reward strategy and the large lot sizes traded do put the trader in a place where is market exposure is likely very large. That said, this means that, in my opinion, I think the expert is prone to wipe your account because of it's market exposure, and I have no convincing evidence to think otherwise.

Also, making the claim that an expert can trade profitably under any market condition is just outrageous. There is no way they could prove this since they don't know how the market has evolved and they cannot even rely in consistent backtest to prove that at least the expert would have performed well in the market conditions spanning from 1999. That said, I think this EA is not worth buying or testing because the EA has a significant market exposure which puts very significant amounts of equity at risk. Even if the increase in lot sizes is not artificial but due to the expert's logic I would never trade an expert that made such a jump in risk. The creators should also consider posting investor access passwords to verify the live accounts are real. I really want to see if those live accounts will stay there or if they'll remove them if the EA crashes (which in my opinion is obvious due to the market exposure of the system).

If you would like to learn more about evaluating systems and trading long term profitable trading systems 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 this article !

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