Today we have a very special review I have also been putting to the side for a while. This review is about the PrecisionTypeA by the RapidForex management group. I was quiet surprised at their website and the way this expert advisor is portrayed by them. I also surprised me in a good way that they are actually money managers who actually use their expert advisor to trade people's money (I suppose, I guess they can also be trading their managed accounts manually). Now of course, all this things don't mean anything until we get to the real evidence of profitability.
The PrecisionTypeA expert advisor has (again to my surprise !) a one year long live testing coupled with a few months of demo testing and backtesting of the expert from 2000 to 2009. Of course, when we analyze the trading system we realize a few things about the way in which it trades the forex market. First, we can see that the EA has a 5:1 risk to reward ratio, which of course, is not my cup of tea for long term profitable systems. The nature of the small take profit can also significantly affect the reliability of the backtesting results. Of course, if you compare backtesting and live results you notice that there is a substantial difference which is probably attributable to backtesting interpolation errors. Therefore, draw downs suffered by the system are terribly underestimated and are most likely 10 times the draw downs shown, as the number of losing trades in backtesting against live testing follows such a relationship.
Then, the live testing and the demo testing do not have investor access passwords we can use to check the expert has actually done all the trades but I mean, this is understandable as most EA sellers who use a service for giving results trust these to prove their authenticity (although you only need a bit of imagination to post fake statements on one of those reporting services). The live testing results have however achieved what I would consider agressive but yet achievable trading results with profits a little bit above 100% with a maximum draw down that I estimated to be near 40% (approx). Of course, this is a rational profit target with an understandable draw down due to the market exposure.
I am worried about the expert not having consistency between back and live testing results something which could mean the expert could wipe accounts on some years in which it looked less profitable in backtesting. For example, 2007 shows a substantially lower profit achievement, which could turn into large loses if you take into account the underestimation of draw down. If the year of 2008 gave profits near 860% according to backtesting and the draw down is so underestimated, then a profit of only near 200% in 2007 could have meant an account wipeout on a live accounts.
Overall, the people that make this EA have made an outstading effort to prove their claims and provide evidence of their profitability, it seems only logical that they are thinking about earning most of their capital through trading their system rather than selling it. However, I think that it is worth noting that the EA should be traded with far less risk than the one suggested on the backtests to correctly preserve equity. Also, I consider that the lack of consistency between back and live testing does not let us appreciate the long term profitability of this expert advisor so we only know it's profitable under 2008 and 2009 market conditions, for this reason I don't consider there is enough evidence of long term profitability to actually buy and trade this EA and be sure it will be stable and profitable in the future (we would also not know this if there was consistency but at least a consistent backtest between 2000 and 2009 and live tests would give us a much higher probability).
Nonetheless, I have to say that it is actually refreshing to see an EA seller who at least does the effort to test his system without trying to deceit people (as far as I can tell). Lets hope all live testing does not mysteriously "vanish" if the system enters large draw downs.
If you would like to learn more about how to stop being ripped off by expert advisor sellers and how to start trading profitably with realistic profit and draw down levels 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 !
The PrecisionTypeA expert advisor has (again to my surprise !) a one year long live testing coupled with a few months of demo testing and backtesting of the expert from 2000 to 2009. Of course, when we analyze the trading system we realize a few things about the way in which it trades the forex market. First, we can see that the EA has a 5:1 risk to reward ratio, which of course, is not my cup of tea for long term profitable systems. The nature of the small take profit can also significantly affect the reliability of the backtesting results. Of course, if you compare backtesting and live results you notice that there is a substantial difference which is probably attributable to backtesting interpolation errors. Therefore, draw downs suffered by the system are terribly underestimated and are most likely 10 times the draw downs shown, as the number of losing trades in backtesting against live testing follows such a relationship.
Then, the live testing and the demo testing do not have investor access passwords we can use to check the expert has actually done all the trades but I mean, this is understandable as most EA sellers who use a service for giving results trust these to prove their authenticity (although you only need a bit of imagination to post fake statements on one of those reporting services). The live testing results have however achieved what I would consider agressive but yet achievable trading results with profits a little bit above 100% with a maximum draw down that I estimated to be near 40% (approx). Of course, this is a rational profit target with an understandable draw down due to the market exposure.
I am worried about the expert not having consistency between back and live testing results something which could mean the expert could wipe accounts on some years in which it looked less profitable in backtesting. For example, 2007 shows a substantially lower profit achievement, which could turn into large loses if you take into account the underestimation of draw down. If the year of 2008 gave profits near 860% according to backtesting and the draw down is so underestimated, then a profit of only near 200% in 2007 could have meant an account wipeout on a live accounts.
Overall, the people that make this EA have made an outstading effort to prove their claims and provide evidence of their profitability, it seems only logical that they are thinking about earning most of their capital through trading their system rather than selling it. However, I think that it is worth noting that the EA should be traded with far less risk than the one suggested on the backtests to correctly preserve equity. Also, I consider that the lack of consistency between back and live testing does not let us appreciate the long term profitability of this expert advisor so we only know it's profitable under 2008 and 2009 market conditions, for this reason I don't consider there is enough evidence of long term profitability to actually buy and trade this EA and be sure it will be stable and profitable in the future (we would also not know this if there was consistency but at least a consistent backtest between 2000 and 2009 and live tests would give us a much higher probability).
Nonetheless, I have to say that it is actually refreshing to see an EA seller who at least does the effort to test his system without trying to deceit people (as far as I can tell). Lets hope all live testing does not mysteriously "vanish" if the system enters large draw downs.
If you would like to learn more about how to stop being ripped off by expert advisor sellers and how to start trading profitably with realistic profit and draw down levels 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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