Monday, November 9, 2009

Forex Expert Advisors : Forex NightFox an Unbiased Review

Today I am going to dedicate this post to the review of a trading system which was suggested to me by a few newsletter subscribers. As always, I will honor their request and write a review abouth the forex nightfox expert advisor with my views about its trading. As all my reviews, this review will focus on the evaluation of the claims provided made by the author against the evidence provided as well as my analysis of the expert's overall trading and my opinion about its long term profitability. Please remember that as all my reviews this review is as unbiased as it can be with no benefit for me for either positive or negative feedback about the trading system. When you read this review keep in mind that I am as interested as anyone else in finding a reliable, long term profitable trading system, my opinions and anaysis are the fruit of years of experience in the trading and analysis of automated trading systems.

Well, lets start from the beginning. The website starts with some pretty bold claims of profitability. The expert claims to have made 7,595 USD in profits from the forex market in 2009. This seems to be backed up by a trading statement from mt4stats shown later on the website. When you look at the statement it becomes apparent that the account cannot be said to be either demo or live, we don't have the slightest idea if trading came from a live or demo account because no inverstor access account password and login are granted. Now, why is this difference extremely important with this expert advisor ? The answer lies within the trading tactics used by the EA.

Not to my surprise, it turnt out that the forex nightfox expert advisor is a EUR/GBP scalper, what is wrong with that ? First of all, it is extremely important to know this because the EA is taking very small profitable trades in the order of 5 or 4 pips, any spread differences and widening found in live trading would obiously negatively affect the EA. As a matter of fact, many of these scalpers are profitable in demo and unprofitable in live testing due to this single problem with EUR/GBP spreads. Besides this, the problem of a very high 10:1 risk to rewards ratio makes the trading strategy unsound. Furthermore, the fact that the EA is scalpers points out another problem.

If you look at the expert's backtesting it is obvious that it suffers from big one minute interpolation errors due to the extremely low TP. This couple with the backtester using a fixed spread makes the backtesting of the forex nightfox and other EUR/GBP scalpers extremely unreliable. Of course, the backtesting that would match the demo testing period is missing, probably because it would be a prove of this lack of consistency. The fact is that backtesting of this type of EA generally shows a lot more profitable trades than demo testing, which still shows profitability, however this is all lost when the EA changes to live testing and real spread widening and requoting starts to happen. Of course, this is the reason why EUR/GBP scalpers are excesively broker dependent and fail to work in long term live trading conditions. More over, the mere scalping strategy is something I dislike since these strategies eventually become void due to changes in the characteristics of the lower timeframe movements.

Since the backtesting is unreliable we cannot know the expert's real performance since 2000, furthermore, since there is no way to know the live performance of the EA since the mt4stats statement cannot be trusted to be live there is absolutely no guarantee against the claims provided by the author of the EA. In my opinion, this nightfox EA is as good as the next EUR/GBP scalper, based on an unsound risk to reward ratio and being excesively dependant on the broker spreads, execution and feeds. Of course, you cannot cope with a 2 pip slipage or a 2 pip increase in spreads when you are in fact getting into the market just to take 2 to 5 pips.

Based on all the above analysis about this expert's strategy I would have to say that this EA is NOT worth buying. The people at forex nightfox would have to provide LIVE statements with investor password access (to verify they are really live accounts) on several brokers so that people can really see the effects of live broker feeds on this EUR/GBP scalper. If the current statement is in fact a live statement then post the investor access password and the name of the broker so that people can achieve similar results. Of course, a 10:1 risk to reward ratio with a 5 pip TP on the EUR/GBP is bound to be unprofitable in the end because of the change in short term trading conditions, the problems associated with brokers and an eventual streak of loses which will wipe months of profits.

If you would like to learn more about what systems I consider worth testing and how you too can become profitable in forex automated trading using 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 the article !

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