Saturday, June 26, 2010

Meta-Trader - Welcome Scalper X

Welcome back Forex Traders.

I've been holding back on you regarding another robot i've been testing and trading live for the past few months. For various reasons, I don't want to identify it so i'll just call it Scalper X. This robot trades EUR/CHF in a manner similar to the Megadroid.

In terms of the name, remember the Speed Racer cartoon? There was a character called Racer X who was rumored to be Speed's long, lost brother. He was a better racer than Speed, but had a falling out with the Racer family due to wrecking the first Mach-5 on the final lap of a big race while crusing toward victory. Check out Racer X for the details. Gotta love Wikipedia for being the authority on stuff like this.

Anyway, I have been trading Scalper X in a live account since 4/19/2010 and its up over 10% in about 53 trades. The performance is actually a little better than the statement shows, since the account was down about 2% when I started trading it.

Scalper X has a lot of properties that I like. It trades almost 4 days a week on a live account. This past week, for example it made over 3% in a single evening on Monday. Most of the time it doesn't reach the profit target and instead exits with a small profit or at breakeven.

When it does take a loss, it seems to do so at a lower level than Megadroid which (if its going to loose at all) loses at least 40 pips. Due to its scalping nature, it is very spread sensitive and therefore will perform different on various brokers. I have a Scalper X multi-broker challenge going as well and may reveal the results at a later date.

In terms of 10-year back-test results, there were 2 loosing years in 2008 and 2007. Every other year had positive results including some years where it had off-the-charts postive results. Needless to say, these results are somewhat suspect.

I did this backtest earlier this year before I started trading live. I tried to re-do these back tests again this morning to compare the live test results with a back test over the same period. Due to issues with the back-tester and high weekend spreads, I could not get an accurate back test going.

Due to the uncertain nature of the back test, i'm likely to suspend live trading on this robot if it takes the account into drawdown. For now, it's in the positive, so we'll see how it works out.

In terms of the other robots, God's Gift EUR/USD picked up 31 pips on the week and is now up 25.8% for the year. Its cousin God's Gift GBP/USD picked up 15 pips on the week and is up 24.4% for the year. These robots have been trading more like scalpers recently. Also, I believe this is the first time that EUR/USD has pulled ahead of GBP/USD so far this year.

I should point out that my God's Gift test results seem to differ from those found on live accounts over at Asirukuy. For example, the 2 live accounts trading GBP/USD lost -40 pips and -33 pips on the week, while my FXDD-based demo added 15 pips on the same trade made the same day at substantially the same entry price. Similar story with EUR/USD which lost -36 pips and -39 pips on trades made 6/24 while my FXDD demo made 31 pips!

I will do a detailed comparison of the settings and see if I spot any differences. But it goes to show you that demo results and live trading results are often substantially different as we know from watching Megadroid.

Speaking of Megadroid, Megadroid Live picked up 10 pips on the week and Megadroid Demo picked up 16 pips.

In terms of the Megadroid multi-broker challenge, they all gained substantially the same number of pips. FXCM's take was doubled due to the fact that's it's still on double lot size due to its drawdown from a loosing trade made the first week of the challenge. Clearly, IamFX is the winner of the bunch here and let's see if it continues.

That's enough for now. I am a bachelor today, so I might have a cool new post ready for you tomorrow AM. Enjoy your Saturday.

Saturday, June 19, 2010

Meta-Trader - Weekly 'Bots Update

Welcome back automated forex traders. It was a quiet week for the Forex Robots.

God's Gift EUR/USD was the winner on the week and picked up 65 pips catching EUR/USD's bounce back from recent lows.

God's Gift GBP/USD gave back 25 pips, exercising some of its many conditions that keep you away from losing trades.

Overall, conditions have been favorable for the God's Gift EA's so far this year. Its important to point out, however, that their back-test history has periods of drawdowns that last years in some cases. So it's important to keep a long-term perspective.

It was a quiet week for the Megadroid. Megadroid Demo picked up 3 pips and Megadroid Live picked up 1 pip.

In terms of the Megadroid Multi-broker challenge, IamFX Demo picked up 4 pips while the FXCM Demo lost 2 pips. While these are demo accounts, it goes to show what a difference a broker makes. And it goes to show you are better off paying IamFX 50 cents for honest execution getting FXCM's "free" execution.-

Also, this week I signed up for Asirikuy Daniel Fernandez's web site on Automated Forex Trading. I have to say so far that its amazing! BTW - I swiped the fern graphic from Daniel's site.

If you are serious about making money with Forex robots, this will be the best $20 you ever spent. At $5.33 per month, it only comes to less than $64 per year. As Redford said the other day, its like he's selling to homeless people ;-) .

Seriously though, its an entire education in automated forex trading. I intend to work my way through it, extract all the best stuff and put it into practice to grow my accounts. So stay tuned on my jouney.

Wednesday, June 16, 2010

Forex Trading - My 5 year plan

Hi all. I think it’s a good time to describe where I expect to my Forex trading going in the next few years.

After a few failed attempts to trade Foreign Exchange in the past (which lost money of course), I feel like I’m finally on the right track with forex robots on the Meta-Trader 4 platform.

Let’s define my objectives for forex trading. I’m not a full-time trader and I’m not looking for forex trading to pay my monthly bills. This is not because I don’t think it is possible, but instead because I have a full-time job and family and household responsibilities. And I find that the job and the family take up about 95% of my time and energy, and at best I have a few free cycles to spend on forex trading and related developments.

At times – particularly with the equity markets – I’m sure I could make good profits from the stock market and have a blast in the process. At the same time, I have no illusions that trading is an easy way to make a living. I consider myself fortunate to have a full-time job and not have to freak out about how I’m going to pay the mortgage.

Anyway, I want to clear this up because you might say that my financial objectives are too low, and that good forex traders should be able to make X percent. These objectives are based on a part-time effort and are in addition to the money I make through my regular day job.

My overall objective is to provide a competitive return for my capital versus the stock market. Some data indicates that historical returns for the Dow Jones Industrial Average are between 8% and 14%. So consider anything over say 20% to be a good rate of return.

Through my work with scalper EA’s, I’ve found that an achievable rate of return is about 1 percent per week. This doesn’t sound like much, but with compounding, that about 64% per year! If (based on the very real chance) that these results are not achievable, I would be perfectly happy with only one half a percent per week or about 28% on an annual basis. Many private equity, hedge fund and equity fund managers would be thrilled to return close to 30% percent to their investors on an annual basis!

Of course, some years you might make more, some years less, and even have some loosing years. But overall, I’m talking about a 5-year average return of at least 30% per year.
So how am I going to grow my wealth using Forex robots? Here’s my 5-year plan.

Year one

Year one is about proving the viability of forex trading robots. In this year I test and evaluate various forex trading robots. I back test, forward test, live test and try out every available option without spending much money.

The wonderful thing about the Meta-Trader platform is that you can download the platform, back, forward and live test without paying any platform fees. It wasn’t very long ago that you had to pay $100 per month or generate the equivalent in commissions to have the Tradestation platform which had real-time charting, back testing and live algorithmic trading. Now you can get all that basically for free and you don’t have to pay anyone even a nickel to get started! Sure you may have purchase some Expert Advisors and web site memberships. But the costs are very reasonable when compared with startup costs for a project of any significance.

In year one I’m investing roughly $2000, and I therefore expect to earn about $20 per week or between $600 and $1200 over one year’s time. As of this writing, I’m about halfway through year 1 and I’m up about 20% on my live funds which is on target.

In year one, I will be running Meta-Trader from my home computers, a Dell Desktop and a Dell Laptop. The laptop is handy because I can move it around the house when I need to setup new experts. The desktop stays parked in the basement.

The last important thing about year one is to assemble a list of experts. Each expert should provide solid and successful 10-year back test history and about 6 months of forward testing and some live testing. Each expert should provide between 30% and 60% yearly profit and show a drawdown (Equity peak to trough) of no more than 30%.

Many thanks to my good friend Daniel Fernandez of who provides a daily education on automated forex trading and most of the robots! DF offers all this information for just a few dollars per month! What a deal!

Year 2

Year 2 will involve increasing my total investments in Forex robots to $10,000. I plan to run a least 5 different systems across different brokers and accounts with approximately $2000 per account. At 1% per week, I should earn about $100 per week. My total yearly earnings should be between $3000 and $6000.

At this point I am undecided whether I will need a Virtual Private Server. DF indicates I can get a low-end VPS for about $10 per month. I’m unclear on whether this will be sufficient to run my 5 or 6 different robot accounts.

Year 2 (and the entire process for that matter) will involve some unexpected adjustments, drawdowns and changes in direction. This is to be expected since markets change, rules of the game change and we have to expect to hit some twist and turns along the path.

Year 3

In year 3, I will increase my total investment to about $20,000. If year 2 works out as planned, that should take only about another $4000-6000 to get me up to the $20,000 mark.

By year 3, I should be making approximately $200 per week. By the end of year 3, I should have earned between $6000 and $12,000.

I will probably require my own industrial-strength VPS before we get too far into year 3. This could cost between $100 and $200 per month according to DF.

Year 4

In year 4, I will increase my total investment to about $40,000. If the prior years work out as expected, I will have to add between $8000 and $14,000 to get to the 40K mark.

By year 4, I should be making approximately $400 per week. By the end of year 4, I should have earned between $12,000 and $24,000. By the end of year 4, I should have between $50,000 and $60,000 under management.

Year 5

In year 5, I will increase my total investment to $100,000. This will require quite a leap since I may have to invest between $40,000 and $50,000 to get up to the 100K mark depending on how I do in prior years. I have the assets available, but I’m going to have some significant college expenses at that time, so there might be other items competing for free capital.

By year 5, I should be making approximately $1000 per week and at the end of year 5, I should have earned between $40,000 and $60,000. At the end of year 5 (assuming I get there as expected), I want to start withdrawing the money and using it pay for my kid’s college, or whatever else comes up. There’s never any problem finding things to spend money on when you are a homeowner!

So that’s my 5 year plan. I think it’s a very solid and achievable plan. I do expect that some of the accounts will have loosing years, but by diversifying across at least 5 different systems, it’s unlikely that they will all go into drawdown at the same time.

Depending on how things go, I’m going to keep my total investment capped at about $100,000. From this I should be able to earn between $30,000 and $60,000 in additional income per year. Not bad for playing around with trading robots!

That’s my plan – stay tuned to my blog as I make my way through this journey!

Saturday, June 12, 2010

Meta-Trader - A Tale of 4 brokers

Welcome back Meta-Traders.

It was another solid week in the land of the Forex Robots. Also, I have some interesting results to share running my favorite scalping robot on some other brokers. But first, let's do the numbers.

God's Gift GBP/USD was the winner on the week picking up 28 pips in a scalper-like fashion. This robot is up 25.4% year to date. Its cousin God's Gift EUR/USD is up 11.6% for the year and picked up 11 pips on the week.

Next up was Megadroid Live which picked up 22 pips on the week and is now up over 20% on the year. Last up was Megadroid Demo which picked up 9 pips on the week and continues to lead the pack up 31.6% on the year.

The performance between Megadroid Live and Demo along with a few other observations have led to the conclusion that the performance of Megadroid is being limited by 3 items:

  • Spread widening which cases the 'droid to not trade at all
  • Wideness of the spread which causes trades to sometimes go into drawdown which would otherwise escape with a narrow profit
  • Error 133 which means the broker simply refuses the trade

To attack these problems, I setup 2 new Megadroid demo accounts, one with FXCM and IamFX. These are both 5-digit brokers with FXCM taking their cut out of the spread and IamFx charging a 50-cent per trade commission, but with a very narrow spread, sometimes less than one pip. Both brokers trade only in lots of 0.10, so I set the accounts up with $2000 each to keep it similar to what I would do in reality. I also set the risk to 0.05 so it would trade o.10 lot.

I hit pay dirt right away on Monday when both the FXCM and IamFX accounts took a quick 10-pip profit. Both 'bots then put on another EUR/USD sell and this one didn't go as well. What was interesting is that the IamFX account escaped with a 2 pip profit while the FXCM account ended up with a 50-pip loss! So in this case, paying a 50-cent commission made the difference between a $1.90 profit and a $50 loss. Is the 50 cent commission worth it? You bet it is!

I'm now tracking performance of the Megadroid on these 4 brokers and the chart in the upper left of the blog shows the performance each each broker in pips by day of the week. So far IamFX is clearly the winner and it will be interesting to watch this going forward. Also, this was a rare week when live Megadroid outperformed my FXDD demo.

The fact that these brokers trade only in lots of 0.10 is a bit of a bummer since we loose the additional compounding caused by increasing trade size as the account grows. This problem goes is minimized with accounts of larger size.

Another interesting thing I learned is that on 5-digit brokers, 10 pips equals 1 pip with a 4-digit broker. So while Megadroid won't trade with a spread over 5 pips, that becomes 50-pips on a 5-digit broker. Megadroid adjusts for this automatically.

Another interesting item is that the Experts tab shows that Megadroid also did not trade at times due to too of wide a spread in the FXCM account. IamFX also widened the spread beyond 50 pips just at about 5PM EST (start of the Megadroid window) just to lower it a few minutes later.

One last observation was how different the trades and results were across the different brokers. I know that under the covers Megadroid uses an CCI and RSI with an 8-bar lookback on a 15-minute bars. Its hard to believe the values could be so different across 4 different brokers but the evidence is clear.

The overall conclusion is that the broker makes a huge difference in the performance of Megadroid. Also, when scaling up the trading to add more funds, it probably makes sense to run the Megadroid across multiple brokers to spread out the risk and increase the opportunity to trade.

That's all for now, check back later and have a fine weekend.

Saturday, June 5, 2010

Meta-Trader - Weekly 'Bot's Update

Welcome back Meta-Traders. Here's my weekly update of forex robot's trading action.

On the global macro side, EUR/USD melted down on Friday after the jobs report, taking out the recent low at 1.2150 settling at 1.1965.

There are some reports that EUR/USD could reach parity with the USD in the next few months which now clearly seem possible. EUR/USD is now down a stunning 31% since its high made late last year and a move to parity is only another 16% from here. So how did our robots make out?

I'm happy to say that all of our robots took home some pips this week.

Megadroid Demo continues to be king of the hill and took home in 11 pips in 2 trades. Megadroid demo broke the 30% mark this past week and is now up 30.6% for the year.

Megadroid Live took the same trades as MD Demo, but I had a minor repeat of last week's "Forex Night Sweats" episode where the live account was on the edge of going into drawdown while the demo account escaped with a 1 pip gain. I waited it out for several hours and almost closed the trade manually, but the trade eventually came back and took one pip on the "Exit with any type of profit" clause of the Megadroid exit conditions.

God's Gift GBP/USD brought in 39 pips and broke the 20% mark this past week and is up an impressive 22.6% for the year.

God's Gift EUR/USD brought in 56 pips, recovering somewhat from last week' 70-pip drawdown. GG EUR/USD is up an impressive 15.1% on the year.

Recall that you get the God's Gift Robots for under $20 here Daniel Fernandez E-Book which continues to be one of the great, under-appreciated bargains in the Meta-Trader industry. I am still working my way through the second half of the book and will be posting some reviews of the other robot's in the Watukushay series if they look promising.

A few other housekeeping items:

1) My issues with Megadroid incorectly calculating lots sizes (remember Megadroid - Watch for sudden acceleration) resolved itself with a simple restart of the platform and reboot of the computer. Its a lesson I learned 20 years ago from the pc industry - when in doubt reboot!

2) The folks over a Clickbank gave me no problem whatsoever with the refund on Forex Maximizer and Megadroid Pro. In the request I included links to the MT4stats page showing the actual robot's performance over the past 2 weeks. So I think it helps to have evidence of any claims you make with Clickbank and with credit card purchases in general.

The Clickbank refund episode has actually emboldended me to buy try buying new robots - because if they really stink, I can get a refund.

I'm also continuing to follow the work of Daniel Fernandez since I think there is some additional gold to be mined in his e-book and on his web site. Its funny because with a little bit of marketing he could be charging 5 times as much as he does for his robots and they would still be better than 90% of the other robots in the industry!

Check back later for more cool stuff.