Another EA I have been asked to review many times during the past month is the FxNitro expert advisor which seems to be one of the newest automated trading systems out there. After a very careful and unbiased analysis, today I will dedicate this post to the review of the FXNitro trading system. My review will carefully analyze the claims made by the authors and the validity of the evidence provided against them. After this I will tell you my opinion about the EA and you will understand why I consider or don't consider it worth buying and testing.
As many other commercial expert advisor websites, the fxnitro website starts with phrases telling us that their trading system is different from others because it has solid proof, it says that it's the end of all the lies out there and a sure way to profit in the forex market. The claims are nothing short of outrageous, a 1,074% monthly profit, extremely low draw down, etc. The creators did a better job than most by providing enough evidence for me to analyze against this claims. This is when all their claims crumble to dust.
First of all, the claims of profits, low draw down, etc, are based on backtesting results. This would appear to be believable at first but everything just falls appart when you consider the way in which the pair trades. The first thing I noticed is that the EA has a very small 4-8 pip take profit, this means that most trades take their profit within the same one minute bar in which the trade is entered, which means that one minute fractal interpolation errors may grossly exagerate profits. Of course, this means that backtesting is completely useless, since the profitability may only be the result of the interpolation errors of the metatrader backtester.
Now another very important factor is the exit side of the trade. The EA uses an internal closing mechanism with no hard stop. The problem with systems that use a rigid take profit and a floating exit mechanism is that you are doing the opposite thing a long term profitable system does. Who would trade by limiting their profits and letting their loses run ? This is exactly what this EA does. The risk to reward ratio of this EA is very bad with the average loss needing 10 winning trades to recover, but this is not the worst since the largets loss needs 20 winning trades to recover.
The live testing is also very interesting since it shows two very important things. First, it shows us that the EA trades less often than in backtesting and that the number of profitable trades is much smaller. If the EA did have a 1024% profit like in backtesting then why is live testing showing only a 130% profit ? The fact seems to be that much less profitable trades are happening in live trading than in backtesting, something that will seriously affect the profitability of the EA if the number of profitable trades is so grossly overestimated (by a factor of almost 10). The thing is that the one minute interpolation errors in this type of expert favors the winning trades almost exclusively with no underestimation of loses. What this means is that reducing profitable trades by such a large number and keeping the huge loses will make the EA lose money in the end. With the very small take profit, the spread on the EUR/CHF is also bound to hugely affect the profitability of the expert making it fall deeper into losing territory.
This EA is a perfect example of how deceiving backtesting results can be and how they can be portrayed by a seller to make an EA seem profitable. Another dangerous aspect of the EA is the profit level reached in live testing which may seem tempting and a solid proof to people who have not made the analysis I presented before. Like other trading systems like the Simple Daily System, these profits are only an illusion before a couple of consecutive loses which will most certainly bring the account into heavy draw down with all profitable trades wiped.
I would never trade an EA based in such unsound trading principles, a huge risk to reward ratio coupled with a "limit your profits, let your loses run" strategy is almost a sure formula for (in my opinion) heavy account loses. In my opinion this EA is not long term profitable and NOT worth testing or buying. Live testing and backtesting have tremendous mismatches with a drastic reduction in profitable trades which will almost certainly mean heavy draw downs and wipeouts because of the extremely high risk to reward ratio.
If you would like to learn more about profitable trading strategies, how you can design and trade your own long term profitable system or how you can trade freely available systems for realistic profits in the world of fx automated 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 !
As many other commercial expert advisor websites, the fxnitro website starts with phrases telling us that their trading system is different from others because it has solid proof, it says that it's the end of all the lies out there and a sure way to profit in the forex market. The claims are nothing short of outrageous, a 1,074% monthly profit, extremely low draw down, etc. The creators did a better job than most by providing enough evidence for me to analyze against this claims. This is when all their claims crumble to dust.
First of all, the claims of profits, low draw down, etc, are based on backtesting results. This would appear to be believable at first but everything just falls appart when you consider the way in which the pair trades. The first thing I noticed is that the EA has a very small 4-8 pip take profit, this means that most trades take their profit within the same one minute bar in which the trade is entered, which means that one minute fractal interpolation errors may grossly exagerate profits. Of course, this means that backtesting is completely useless, since the profitability may only be the result of the interpolation errors of the metatrader backtester.
Now another very important factor is the exit side of the trade. The EA uses an internal closing mechanism with no hard stop. The problem with systems that use a rigid take profit and a floating exit mechanism is that you are doing the opposite thing a long term profitable system does. Who would trade by limiting their profits and letting their loses run ? This is exactly what this EA does. The risk to reward ratio of this EA is very bad with the average loss needing 10 winning trades to recover, but this is not the worst since the largets loss needs 20 winning trades to recover.
The live testing is also very interesting since it shows two very important things. First, it shows us that the EA trades less often than in backtesting and that the number of profitable trades is much smaller. If the EA did have a 1024% profit like in backtesting then why is live testing showing only a 130% profit ? The fact seems to be that much less profitable trades are happening in live trading than in backtesting, something that will seriously affect the profitability of the EA if the number of profitable trades is so grossly overestimated (by a factor of almost 10). The thing is that the one minute interpolation errors in this type of expert favors the winning trades almost exclusively with no underestimation of loses. What this means is that reducing profitable trades by such a large number and keeping the huge loses will make the EA lose money in the end. With the very small take profit, the spread on the EUR/CHF is also bound to hugely affect the profitability of the expert making it fall deeper into losing territory.
This EA is a perfect example of how deceiving backtesting results can be and how they can be portrayed by a seller to make an EA seem profitable. Another dangerous aspect of the EA is the profit level reached in live testing which may seem tempting and a solid proof to people who have not made the analysis I presented before. Like other trading systems like the Simple Daily System, these profits are only an illusion before a couple of consecutive loses which will most certainly bring the account into heavy draw down with all profitable trades wiped.
I would never trade an EA based in such unsound trading principles, a huge risk to reward ratio coupled with a "limit your profits, let your loses run" strategy is almost a sure formula for (in my opinion) heavy account loses. In my opinion this EA is not long term profitable and NOT worth testing or buying. Live testing and backtesting have tremendous mismatches with a drastic reduction in profitable trades which will almost certainly mean heavy draw downs and wipeouts because of the extremely high risk to reward ratio.
If you would like to learn more about profitable trading strategies, how you can design and trade your own long term profitable system or how you can trade freely available systems for realistic profits in the world of fx automated 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 !
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