Monday, January 11, 2010

Forex Expert Advisors : FxReports, an Unbiased Review

Several weeks ago a website visitor asked me to review an automated trading system company and the products they offer on their website. The website looked interesting to this visitor since they offer forward testing account results updated through myfxbook with confirmed investor access and trading priviliges. Of course, I am interested on reviewing any new systems out there that may appear to be profitable so today I am going to fulfill his request and review the FxReports website and their Arthur, Excalibur, Gneuviere, Lancelot and Merlin automated trading systems. My review will focus on evaluating the claims made by the author against the evidence provided on his website. In the end I will give my opinion on the experts and if I consider them worth buying and testing or not.

First of all, the author of the FxReports website does make a decent web site. The web page does not have any hype and the trading systems are portrayed without any claims made whatsoever. It is my believe that the author wants us to infere the actual profitability of the expert advisors from the actual forward testing results shown. I also like his scam section where he has a list of several different expert advisors which are copy-cats of different freely available trading systems. Definitely by showing that many commercial experts are actually rip offs of free ones he is showing people that definitely they are just buying dreams. Tthe free experts are always available out there, just without the sales pages.

What about the website's forward testing results ? Well, this is were things start to get a little bit bad for the trading systems offered by FxReport. My problem with his tests are quiet a few. All of his trading systems are run on demo, NOT on live accounts and this poses a HUGE problem because of the strategies used by the trading systems. All of these experts take profits in very small amounts, most on even less than 2 or 3 times the spread. This is the classical problem of demo/live testing consistency found when one tries to take small profits from the forex market. When you move that to a live account you will see that reality changes a lot because small profits are affected deeply by requotes, spread widening, etc, which are what mainly differentiates a live from a demo account.

I have seen many times this type of experts which "scalp" different pairs turn to dust when they move to a live account. There is also the problem that when taking such small profits GREAT differences between brokers arise and broker dependency becomes a huge issue. The author obviously does not include backtesting results because at such profit levels the results would be totally meaningless. Probably the EA on backtesting would make trillions due to one minute interpolation errors. There is then no way to accurately measure long term profitability which means that we have no idea if next month the EA will stop working on the market, something which most of the time happens with systems that rely on very low take profit values.

The lack of data to assess long term profitability, the lack of accuracy of forward testing results on this type of systems and the absence of live accounts (which anyway would have to be at least 2 years or older to give a true picture of the system, due to the absence of reliable backtesting) make all the expert advisors on the FxReports website NOT worth buying or testing. I would advice the author of this EA to take the profit of selling 2 of these experts, put up 3 micro live accounts on IBFX, 3 micro live accounts on Alpari US and run a live test so that people can really see the system run on the real market. If this evidence is provided I will be glad to rewrite my review to include this new trading evidence.

If you would like to learn more about long term profitable systems, how to design them, program them and trade them profitably 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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