I have been becoming more and more worried about the large number of people who seem to be buying and using the megadroid expert advisor with seemingly successful results without realising the very large market exposure and risk they are putting their accounts into. Today I want to dedicate this post to the discussion of megadroid's evidence for long term profitability and why its trading tactics will lead to an account wipeout in the future with a very high probability. I want to write this post to know that I did my best to warn current Megadroid users about the potential hazards of this trading system. I want to make clear before I start that I do not write this post because I am "jelous" or "offended" by the profitability of other forex traders or because I want to sell my own systems. On the absolute contrary, I write this post out of genuine concern for people's capital safety and NOT to try to sell you anything. In fact, anyone looking for long term profitability can use one of my systems, Watukushay For Everyone, which I make available for absolutely NO charge.
I have to say that I understand the reasons why so many people may seem interested in trading the megadroid trading system. The system seems to have a wealth of both backtesting and live testing information provided by the author with a significant amount of third party tests which shows the expert to be profitable amongst time periods of at least 6 months on different brokers on live accounts. What is so wrong with megadroid then that compelled me to write this post ? Several things.
To start from the beginning, the information provided by the author is not confirmed by any third party and there have always been rumors about the author omitting loses from the statements, clearly we cannot trust the live account results of an EA seller without investor access or true third party confirmation such as that provided by myfxbook. There also seems to be significant discrepancies between simulations and live trading results (over longer periods of testing) which are definitely a result of one minute interpolation errors. Periods of 6 months of live testing compared to simulations show disparity related to the number of profitable and losing trades and great broker dependency between different tests, it then becomes evident that megadroid may be exposed to a much higher draw down than that predicted by backtesting results.
However the thing that worries me the most is the fact that the Megadroid expert advisor is a hidden Martingale. The EA loses with little frequency (which is needed even for break even results due to the very unfavorable risk to reward ratio of the trading system) but it doubles its lot size when it hits its big stoploss. The fact is that if you hit a series of consecutive loses of even as little as 3 or 4 loses, you could lose your entire account. Megadroid is a very risky trading system and it always exposes a VERY significant amount of capital 10-20% on every trade. Add a martingale to that and you have a time bomb.
To me, the current state of the megadroid expert advisor is like that of a Ponzi scheme when it gains popularity. Everyone is happy, many people are making money and finally the cash flow is so huge that the Ponzi scheme becomes unsustainable and the inevitable total loses of capital happen. Megadroid may remain profitable for more time, but the truth is that the system's market exposure is simply absurd, its a hidden martingale, a wolf in sheep clothing andI have absolutely no doubt that it WILL show its true colors as time passes by.
I hope that my arguments have been strong enough to convince those willing to listen to third party arguments to NOT trade this trading system as its trading tactics are simply unsound and its money management is simply against everything experienced traders would ever do. As I said on the beginning of this post, for those looking for long term profitability there is always Wautukushay FE. If you are however interested in a true understanding of the development of long term profitable system with sound trading tactics so that you can design and trade your own long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
I have to say that I understand the reasons why so many people may seem interested in trading the megadroid trading system. The system seems to have a wealth of both backtesting and live testing information provided by the author with a significant amount of third party tests which shows the expert to be profitable amongst time periods of at least 6 months on different brokers on live accounts. What is so wrong with megadroid then that compelled me to write this post ? Several things.
To start from the beginning, the information provided by the author is not confirmed by any third party and there have always been rumors about the author omitting loses from the statements, clearly we cannot trust the live account results of an EA seller without investor access or true third party confirmation such as that provided by myfxbook. There also seems to be significant discrepancies between simulations and live trading results (over longer periods of testing) which are definitely a result of one minute interpolation errors. Periods of 6 months of live testing compared to simulations show disparity related to the number of profitable and losing trades and great broker dependency between different tests, it then becomes evident that megadroid may be exposed to a much higher draw down than that predicted by backtesting results.
However the thing that worries me the most is the fact that the Megadroid expert advisor is a hidden Martingale. The EA loses with little frequency (which is needed even for break even results due to the very unfavorable risk to reward ratio of the trading system) but it doubles its lot size when it hits its big stoploss. The fact is that if you hit a series of consecutive loses of even as little as 3 or 4 loses, you could lose your entire account. Megadroid is a very risky trading system and it always exposes a VERY significant amount of capital 10-20% on every trade. Add a martingale to that and you have a time bomb.
To me, the current state of the megadroid expert advisor is like that of a Ponzi scheme when it gains popularity. Everyone is happy, many people are making money and finally the cash flow is so huge that the Ponzi scheme becomes unsustainable and the inevitable total loses of capital happen. Megadroid may remain profitable for more time, but the truth is that the system's market exposure is simply absurd, its a hidden martingale, a wolf in sheep clothing andI have absolutely no doubt that it WILL show its true colors as time passes by.
I hope that my arguments have been strong enough to convince those willing to listen to third party arguments to NOT trade this trading system as its trading tactics are simply unsound and its money management is simply against everything experienced traders would ever do. As I said on the beginning of this post, for those looking for long term profitability there is always Wautukushay FE. If you are however interested in a true understanding of the development of long term profitable system with sound trading tactics so that you can design and trade your own long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
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4 comments:
Daniel-
I'm running Megadroid in both live and demo accounts after 10-years of good back test results. I haven't found a robot anywhere that tests or trades with such reliability.
The Martingale aspect of the system only kicks in if the account goes into negative equity, they call that 'Recovery Mode' in order to get back to the postive faster. The lot size increases only 1 time after the account goes into drawdown. Even with that, it would take a long series of losses to wipe out my account. Could it happen? Sure it can and that's why i'm only risking a small amount of money as it is.
On under-appreciated aspect of Megadroid is how it handles trades once its in them. It calculates a take profit and stop loss values, but does not broadcast them to the broker. It it rarely stays in a trade for a long time and usually exits with a 10-pip or smaller profit. It seems to have a time stop and will get out of positions after a time (at break-even or small profit) if the timeout expires. The behavior seems to result in avoiding losses which it does very well with a better than 90% win rate.
The popularity of the robot itself could cause it to fail eventually, but I haven't seen any evidence of that happening yet in the short time I have been trading it live.
All the best,
Chris
http://fx-mon.blogspot.com
Hello Chris,
I thought you would answer to this post ! :o) Thanks a lot for your comments on Megadroid.
My problem with your arguments are several, starting with the fact that the small TP makes backtesting unreliable almost by definition, it makes it prone to 1 minute interpolation errors to a big extent, so your conclusions based on 10 year backtests are simply not valid. As I say they are big discrepancies between large periods of backtesting and real live trading (six months). (these discrepancies are not prone to be shown on short periods of time due to the high winning rate but do show the system to underestimate loses during long periods)
My other problem is the broker dependency of the EA which seems to be very very significant and the use of a Martingale aspect and the encouragement of very high risk settings by the authors (which you have to use if you want to reproduce their backtesting results).
For example, you talk on your site about a draw down of 40% on backtesting (with reduced risk), however one minute interpolation errors and broker dependency issues could easily hide a draw down 3 or 4 times higher than that, so perhaps you are thinking there won't be a wipeout when in reality there could have already been one in the past with your risk settings. As a rule of thumb you should always expect at least double the draw down you see in backtesting (since you cannot assume that historical draw down is the worst the system can do) and an 80% loss is simply not acceptable.
My opinion is that this trading system is based on unsound tactics which cannot be historicaly validated using the backtester and which put people's equity at a very significant risk. Added to that is what you mention, an EA which aims to take such a small amount of pips is very prone to loose its effectiveness when many people start to trade it.
Well, perhaps I won't be able to convince you or others but I am glad I have tried :o). Thanks again for your comments and constant interest on my blog !
Best Regards,
Daniel Fernandez
Daniel-
Agreed that live testing is the only real test, so we'll see what happens! Cheers,
Chris
Hi Daniel - I'm glad to see your comments on Megadroid. I was using the system for a while, and at first was quite profitable. Then it hit 2 large losses in a row, which I know can happen to any system. The problem arose when their website results did not reflect these losses and they continued to claim some outlandish yearly profits. I checked peacearmy and pipcop and both showed the losses. The only conclusion I can assume, is that they altered the results on their website. Of course, I immediately pulled the EA and am glad to see you giving such a honest and forthright commentary.
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