Friday, April 16, 2010

Making a System to Sell or Making a System to Trade... Two Very Different Approaches

After working in automated trading systems for so long and revieweing hundreds of commercial expert advisors I think that one of the key problems in the area of expert advisors development and the main reason why most commercial systems do not amount to anything worthwhile is the fact that there is a strong difference between developing a system to sell it and developing a system to trade it. You may think that such a difference does not exist because any system which is good enough to be traded is good enough to be sold and that is true to some extent. However, the problem is centered around the fact that making a system that can be sold is much easier than making a system that is good enough to be traded because most people do not have high standards for the judgement of automated trading systems, probably due to either lack of experience or lack of willingness to enforce it.

To me, a tradable expert advisor is a system which shows enough evidence to be considered to have a high like hood of being profitable under future market conditions. This evidence should include extensive 10 year backtests coupled with years of live trading to show the expert's back/live testing consistency, etc. Designing, programming and trading these systems is very hard and demanding. If an honest sellers wished to code a system and offer real, reliable evidence of profitability he or she would need to spend years testing the system in order to ensure the highest like hood of future performance. After all this effort it is also very likely that this person will have problems selling the system due to the fact that profit targets are probably much lower and draw down periods are probably much longer and deeper than for the other systems which would be available in the market.

What we currently have in the expert advisor market is best defined as a systemhrrea, it is an uncrontrollable urge of sellers to put forward as many untested and unreliable trading systems in the fastest fashion possible with the most cheesy and unethical marketing techniques to get people to buy these systems. The expert advisors being sold often have very limited if any evidence of profitability coupled with an obvious willingness to hide evidence and a dishonest - almost insulting - set of stories which have no place in reality.

This problem is of course a consequence of the fact that selling expert advisors is a risk-free way of making a profit in a high-risk market. The people who end up paying with their account balance and hard-earned money are the buyers who often have no idea that they are being sold a piece of very well decorated garbage. The willingness to believe that those extremely ambitious profit targets are possible with low risk and the eagerness of sellers to take advantage of this fact sets up the perfect stage for our current expert advisor market. As they say around here, hunger meets the desire to eat.

Is there a solution ? Sadly I cannot think about even one. It is extremely easier to sell these worthless systems than to develop systems which are made for trading. Expert advisor sellers don't give a damn about long term profitability as long as they can show some profitability (sometimes even none) to sell some victim their toxic product. After that they will have their profit and they will be able to ditch their useless system or simply redo all the marketing and start all over again (which is what they often do).

Sure, there is no way in which anyone can guarantee profits in forex trading but if these sellers were really after systems which aimed at long term profitability they would do everything possible to ensure that the experts have as much evidence as possible to backup their claims. I for example develop my systems with profitability in mind (because I live from their trading) so even though my systems are much less attractive compared with the average commercial EA, I am able to say that I have as much evidence as possible about their profitability and I am confident in their ability to tackle and survive to future market conditions. Even though I cannot guarantee that my systems will always be profitable I ensure that I have done my best so that they have the highest possible like hood of doing so.

People will often find with surprise that trading long term profitable systems is actually not easy and that a lot of psychological pressure and testing of confidence comes to play. It is obvious that if automated trading was a straight forward, easy way towards riches, everybody would be doing it and everybody would be rich. This is not the case, not because profitable trading with automated trading system is impossible, but because it is much HARDER than what EA sellers want you to believe.

This is the reason why I decided NOT to sell experts but I decided to sell an education, because this is what I believe is the KEY to long term profits in automated trading, if all it took was to set and forget a system, many people would already be rich. If you want to learn more about automated trading systems and truly gain an education in expert advisor analysis and development from what I have learned in this field 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 !

3 comments:

Maxim said...

Daniel,

You are the one and the only honest automatic trading mentor in the net! Thanks a lot for all your effort!

Maxim

Daniel said...

Hello Maxim,

Thanks a lot for your comment and kind words :o) I am definitely not sure if I am the only honest or the best mentor available on the net but I can tell you that I do my best effort ! I am glad that you hold me in such a high standard :o) Thanks again for your comment Maxim,

Best Regards,

Daniel

townjet said...

Great Post Daniel,

In my going on 4 years in currency trading, one of the stark realities you eventually find is everything you just mentioned in this post. Seems everyone is trying to take advantage of a greedy type situation from EA's to Zulutrade. It is far easier to make money fooling the ones looking to make money. That is a weird sounding phrase, but very true. In my few years of trading I have come to the conclusive thought that I need to take currency trading in my own hands. I trade my own systems, I create my own EA's, I do my own research, etc. Sometimes a dose of logic is the thing needed... If I actually had a trading system or EA that made thousands in months and could have done so for 10 years, would I keep that to myself, or sell it to the world? Wouldn't I already be wealthy to where I don't need to try and sell it? I don't know, maybe I would get tired of making thousands and try to sell it just to make hundreds... :) Jokes aside, I wish I could help people discover what you just wrote about quicker than I did. Trading currency is not a get rich quick scheme... I suppose if we step into a trap based on our greed, well, maybe we will learn something from it and gain a little humility.

JT

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