Risk Simulation and The Monte Carlo Method - Forex Article

Monte CarloThere do not seem to have been any new EAs released recently of sufficient interest to capture my attention, so I thought I'd write an article about how to use either backtest or forward test results to gain further information about how good or bad a trading system actually is.

I guess this article could be viewed as a follow up to my previous article asking "Why do all Expert Advisors Fail?". In that article I suggested that some or many EAs didn't actually fail at all, but instead were discarded or written off by their users because those users had a completely different level of expectation to what the system would be likely to deliver in reality.

Let's face it, wouldn't it be fantastic if you were to buy an Expert Advisor, deposit $10k into an account, and the EA never had a losing trade? Inside of a year, your account balance might be up to $20k, or $100k or even more.

Sadly though, life just isn't like that, and stories like that very rarely actually happen in reality.

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Forex Growth Bot - Expert Advisor in Forward Test

Forex Growth BotI was first attracted to the Forex Growth Bot because it offers what appears to be a very attractive risk/reward ratio. Many of the EAs that I look at offer a very high win rate (often 80% or more), but they only achieve this high win rate through taking small profits and operating large stop-losses. This gives them a very high risk/reward ratio, and it means that users can sometimes find a single stop-loss with a high risk/reward robot will wipe out weeks or even months of gains.

Forex Growth Bot, however, appears to be different to these types of robot. The backtests on the vendor's website (and also the forward test which has so far been running over 5 months) suggest that the system is likely to win less than 50% of its trades, but its risk/reward ratio seems to be somewhere between 0.4 and 0.5, meaning the average profit is likely to be over twice the size of the average loss. The EA is made even more attractive by the fact that its average win size is around 60 or 70 pips which should theoretically mean that its performance is unlikely to change much regardless of which broker it's run on.

The system works on just one currency symbol, the EURUSD, and runs on the 15-minute chart. I wanted to test it for myself to see if it can live up to its promises.

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Forex Morning Trade - Expert Advisor in Forward Test

Forex Morning Trade

Forex Morning Trade is an EA which is based upon a manual trading system of the same name.

The system works on just one currency symbol, the GBPUSD, and there's a very strong clue as to how it works in the name.

For all budding detectives out there, you've probably guessed that it takes one trade at the same time each morning. Unfortunately, the time it trades is a time when most Europeans are still in their PJ's and most Americans are either already in bed or enjoying their evening.

There's a very strong background case, therefore, for converting a strategy like this into a robot.

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Wall Street Forex Robot - Expert Advisor Review

Wall Street Forex RobotThe Wall Street Forex Robot is a scalping robot which looks to bank just a few pips of profit at a time. There is no shortage of robots like this available on the market, but they generally tend to scalp during thin Asian trade when market liquidity can be a major issue which impairs the robot's performance on live accounts.

So what makes the Wall Street Forex Robot any different from all the others?

Well, the Wall Street EA is certainly different in that it has no such trading time restrictions and it will trade at all times of the day, hopefully when there is greater liquidity within the market and there is no problem in getting trades away.

It's also different in that it fetches its settings from the vendor's server each time that it starts. This means that the vendor can issue newly optimised settings which the EA will automatically detect and use, enabling it to stay at the top of its game without the user needing to manually update his own copy of the robot.

That's the theory anyway. I wanted to test the EA thoroughly to see if it could live up to this high level of expectation.

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Forex Shocker and Wall Street Robot - Expert Advisors in Forward Test

Forex Shocker is an EA which many will be familiar with already as it's been around for a couple of years now since 2009. Reviews have tended to be mixed, so I wanted to see for myself how good it actually is.

It's a scalper which just takes a few pips at a time for a couple of hours each day in what I call "The Twilight Zone". That's the time after the US has closed for the day and before Asia has really got going.

At these times, trade can be very thin and liquidity can be a big issue, so one of my concerns is how Forex Shocker would perform with the wider spreads that you tend to see around these times.

So far, my testing has shown mixed results and I'm still undecided as to whether to continue and prepare a full review or not.

Nonetheless, I've put Forex Shocker into a forward test on a $5k Alpari UK demo account trading all 6 of its suitable currency symbols.

You can also monitor Forex Shocker's performance at MellyForex by clicking here.

The other EA which I've chosen to test is brand new and it's called Wall Street Forex Robot. It is also a scalper, but supposedly with a big difference.

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PipRider - Expert Advisor Review

PipRiderWhen I first started to look at the PipRider EA I hadn't realised that I was going to have to jump through hoops in order to test the EA and write this review. :o

The EA is heavily protected against piracy and, as a result, it runs very slowly in the Strategy Tester. Whereas a normal 10 year test may take anything between 1 and 3 hours, a 10 year PipRider strategy test takes anything upwards of a week.

Fortunately, the PipRider support is pretty responsive and, when I explained to them what I was trying to achieve, they were able to assist in speeding the process up considerably.

Of all the Expert Advisor websites I've visited, the PipRider website is one of the more comprehensive and informative sites. It consists of several pages and explains in reasonable detail how PipRider works. There is both forward and strategy test information, together with a page dedicated to a free indicator and another page detailing a partnership broker offer which enables prospective PipRider purchasers to get the robot for free.

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MetaPRO Forex - Expert Advisor Review

MetaPRO Forex Having decided to review the MetaPRO Forex EA I realised instantly that running my normal 10 year backtest might be counter-productive in this case.

The MetaPRO website makes no secret that their EA is optimised for 2010, and I wasn't of a mind to believe anything else.

Incidentally, the MetaPRO website is quite informative and factual and consists of several linked pages rather than the typical one-page salesletter which seems to be the norm in the EA business. The website contains both backtests and forward tests, together with an explanation of what the EA actually does and what it's looking to achieve.

MetaPRO Forex is delivered in its own self-installer which makes for a nice and easy set up and it comes with its own 9 page PDF instruction manual which, in my opinion, isn't particularly clear. That said, I know enough about these things to be able to get it up and running to find out what it's really made of.

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Let the trend be your friend till the bend at the end

Let the Trend be your FriendIn this article I'm going to attempt to explain a little bit about my personal trading style.

The thing about trading is that it isn't an exact science, and there is no such thing as a "right" way or a "wrong" way. Oh, if it were only that easy, we'd all be doing it. :wink:

Everybody seems to be looking for something different from their trades, and there are obviously many different approaches that you can employ.

Some people will look to scalp 3 or 4 pips at a time, while others will be happy to stay in their trades for days or more in the hope they can rack up gains of hundreds of pips. Some people will follow chart patterns, some people will follow indicators, some people will trade ranges and others will probably just flip a coin.

The best way of describing my personal approach is that I trade with the trend. My most useful tools are, believe it or not, a ruler and a pencil. That's right, the sort of thing which you can find in any corner shop for about 50p.

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