Wednesday, January 6, 2010

Forex Expert Advisors : The Fade Machine, an Unbiased Review

A few days ago, while searching for new automated trading systems I came across a trading system called "the fade machine" made by a company called "the trade machine". Today's post will be dedicated to the evaluation and review of the fade machine. As always I will evaluate the evidence provided on the website against the claims made by the author. I will also go through the trading statements and give my opinion about the potential for long term profitability of the trading system. As always, all my reviews are as unbiased as they can be with no reward for either positive or negative comments on this system.

This system is one of the few which seems to have both back and live testing statements which I can access in order to have some chance of comparing live/back testing consistency. Sadly the live testing statement of the expert seem to be of doubtful origin at best with no confirmation by third parties or investor access to verify the account is real. The backtesting statement, although of high enough quality, does not contain the period of the live test which is from September 09. The fact that the live test includes two currency pairs also makes comparison rather difficult.

The system seems to trade on the 15 minutes time frame and seems to use SL and TL targets which would put it out of what I consider the range for one minute interpolation errors on the EUR/USD and GBP/USD. However the fact that the time frame is so low makes it still possible that some errors are present on indicator calculations (if calculated on actual bar) and that may affect the profitability of backtesting results. As always, the best solution is to have live results that are comparable to a backtesting period in order to know if this is the case.

The equity curve of the system from 2002 does seem to fit that of what I would consider the curve of a long term profitable trading system, the system is globally profitable but does have some periods of draw down which I would consider normal for such a trading strategy. The profit/risk targets are quiet high but this might be the consequence of errors inherent to the use of the 15 minute time frame which has much less reference points in backtesting than a higher time frame, like the one hour. I would say that back/live testing consistency is definitely a must when such a time frame is used, specially if it is also coming from a commercial EA. However the profit/risk should not be more than 20% less than the projected by the backtests even if there were some errors due to the lower time frame.

I would say that the people at the trade machine do have something interesting with the fade machine expert advisor. Is it worth buying right now ? Probably not, but they sure are close to proving they have something interesting. Certainly if they provide the investor access or a myfxbook confirmed live account and a backtesting of the same period I would be inclined to buy and test the system as part of the newsletter. Also, did you notice the lot size graph on the backtests ? This EA definitely uses volatility adjusted money management. What a plus !

Well, there sure are somethings out there worth looking within all the garbage dump that is the commercial world of expert advisors. The fade machine trading system is certainly close to providing the first commercial expert advisor that fulfills my criteria for long term profitability to the letter, they just need some more effort with the live testing and back/live testing consistency analysis and we'll get there. I'll make sure I email them to let them know.

If you would like to learn more about my criteria for long term profitability and how you too can design and program your own long term profitable systems or use a free reliable long term profitable trading system with realistic profit/risk targets 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 !

1 comment:

Daniel said...

Well, the people at the trade machine have answered my email asking for myfxbook widgets on their site :


Dear Daniel,

Thank you for your recent review of the Fade Machine EA. We will look into setting up myfxbook and get back to you once we get it going. We will also be updating our backtest results with 2009 data very soon.

Best Regards,

John Dowd
The Trade Machine Team


I will post any other emails they send me after their setup is complete. We'll see if they can confirm the reality of their live account and live/back testing consistency.

Best Regards,


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