If you're from the United States you may well never have heard of Buru Trader. However if you're a customer of Interbank FX Australia like me, you probably will have done. It's a bundle of two MetaTrader 4 expert advisors called "buru New York" and "buru Tokyo", which IBFX Australia have been promoting over the last few months.  On March 15th IBFX were inviting their customers to find out about:

An exclusive MT4 Expert Advisor Buru, powered by our revolutionary technology

and suggesting that you might like to:

Revolutionise your trading. IBFX Australia is the exclusive execution platform for Buru, the MT4 EA that has consistently earned impressive gains since June 6, 2010:

* Average Weekly Return: +2.5%*

* Average Monthly Return: +10.7%*

* Full History of 267 days: +151.06%*

Buru is an EA that requires the cutting-edge proprietary technology found with IBFX Australia.

* Past performance is not necessarily indicative of future results. Individual results may vary.

That last point certainly seems to have been rather prescient, since whatever the merits of Interbank FX's cutting-edge technology Buru itself has turned out to be anything but revolutionary. According to an email I received from IBFX Australia on March 14th:

Prior to partnering with IBFX Australia, Buru's system was tested with multiple MT4 brokers. The results were far from satisfactory until IBFX Australia surpassed expectations with their live account performance, superior execution and liquidity management.

Even in partnership with IBFX Australia, the results of Buru's system(s) have now proved to be far from satisfactory once again.  Initially Buru Partners were keen that prospective purchasers of their EAs should view some "Customer Live Account Statistics". As you can see, that page currently doesn't seem to be working properly.  However there are still some "live" statistics visible on the Buru home page, which look like this at the moment:

Buru New York EA Live Statistics on May 20th 2011

Buru New York EA Live Statistics on May 20th 2011

Click the image to see more detailed statistics about "an independent customers live account" courtesy of myfxbook.  According to myfxbook the loss on this account currently stands at $151,712.99. It looks as though you need some very deep pockets indeed to be able to let Buru Trader loose on your account without the "robot" wiping it out for you!  For another perspective on what seems like a big problem with Buru we did some backtesting here at Guru Towers, using version 1.2 of the Buru New York EA on the EUR/USD pair with the default "Risk Factor" of 0.5 and starting on June 6th 2010. This is what we discovered:

Buru New York backtest from June 6th 2010

Buru New York backtest from June 6th 2010

The first thing to note is that a taste of things to come had already occurred on December 17th 2010, when the largest trade size rose to 3.25 and the backtest balance briefly plummeted. The second thing to note is that the backtest finished prematurely at 3:56 on May 2nd 2011, by which time the maximum open trade size had risen to 5.84. That trade was "closed at stop" along with the other 22 that were open at the time.

Next we took a look at Buru Tokyo, again using the default settings over the same period of time and on the EUR/USD pair. This is what the MT4 strategy tester revealed:

Buru Tokyo backtest results on EUR/USD

Buru Tokyo backtest results on EUR/USD

This time around it looks like Buru Tokyo decided to short the euro early on the morning of April 19th. Inconveniently for Buru users the euro then decided to rally. As it did so Buru Tokyo kept on selling in ever greater size, all the way up until at 8:48 the following day it finally decided to cut its losses and closed all 13 shorts for a loss of around half the account.

What is the moral of this cautionary tale?  Take a look at Ray the Random Robot's equity curve, which you can find handily located just to the top left of this post.  Click on it if  you'd like to check out some more detailed statistics courtesy of myfxbook. Amongst other things Ray demonstrates how easy it is for even the dumbest of "robots" to produce an impressive looking equity curve that keeps on looking impressive for far longer than the 30 day money back guarantee period offered by Buru Trader, or even the 60 days that comes with some other expert advisors.  Ray's "secret" is the same as Buru's. They both increase their trade size after taking a loss. Ray uses a fixed stop loss and martingale money management, whereas Buru uses a grid system with no traditional stop losses, but the end result is the same. The problem is that when you eventually suffer an extended sequence of losses with such robots you'll find you need to hurriedly fund your trading account with large quantities of cash to avoid disaster. If you're unable to do that you'll just have to look on helplessly as your account rapidly disappears before your very eyes, assuming you're awake at the time that is.

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When the TradeStation Group announced last month that TradeStation Forex Inc. would be opening for business in the near future we speculated what "a few weeks" might mean.  Now we know, and in this case it means just under a month. In a press release earlier today TradeStation:

Announced the launch, through its new subsidiary, TradeStation Forex, Inc., a CFTC-registered, NFA-member Retail Foreign Exchange Dealer (RFED), of a brand-new, state-of-the-art retail forex offering. Starting today, TradeStation Forex, using what is commonly referred to as the "agency broker model" for retail forex, will own and operate the company's forex business for all existing and new customer accounts.

The new announcement confirmed that clients of TradeStation Forex will not have to pay any commissions, or any fees to use the platform or to access market data. According to the President of TradeStation Forex, Gary Weiss:

We believe our combination of features and pricing produces a powerful offering that is superior to what is available in the market today for retail forex traders. We think TradeStation can now become a dominant brand in the retail forex market, just like it has been in the online equities and futures markets over the past ten years, and we plan to devote dedicated marketing dollars and focus to this launch and to grow market share as quickly as reasonably possible.

Personally I'm not as sure as Gary seems to be about that.  Let's take a look at a some of the bullet points that TradeStation highlight as "Powerful and attractive features":

  • A brand-new screen interface for traders to place forex orders in an intuitive and familiar way, which is seamlessly integrated with the full analytics power of the TradeStation platform.
  • The ability to design, back-test, optimize and automate custom-designed and third-party forex trading strategies and ideas.
  • The functionality of TradeStation's premium RadarScreen® product (TradeStation's state-of-the-art market scanning engine), so that customers can analyze multiple foreign currency pairs simultaneously on one screen.
  • A forex market depth window.
  • Transparent foreign currency spreads which, including TradeStation's small mark-up, are expected to be extremely tight and competitive – superior, the company believes, to what is generally available today in the market.

Here's what some of those new features look like, illustrating a Cable trade I made earlier on a TradeStation simulated forex account. Firstly something fairly familiar; an unadulterated chart of GBP/USD:

TradeStation 9.0 chart for GBP/USD

TradeStation 9.0 chart for GBP/USD

As you can see, my first TradeStation demo forex trade was for the minimum quantity of 10,000, and what's more it didn't start off too well! Now let's look at something rather less familiar, to MetaTrader 4 users at least; two different ways of looking at market depth:

TradeStation forex depth of market

TradeStation forex depth of market

If you're currently a MetaTrader user there's any amount of things in that screenshot that are not very familiar, and probably not very intuitive either. On the left is a "Market Depth" window, incorporating the new "Quick Trade Bar" which might seem vaguely familiar at least. Notice that I entered the trade using the "shave" option to place a limit order inside the spread. On the right is a "Matrix" window, showing a different view of market depth plus any open or pending orders close to the current market price.

Moving on to automated trading, whilst TradeStation 9.0 may provide you with the ability to "use custom-designed and third-party forex trading strategies and ideas", any such strategies will need to be written in TradeStation's own "EasyLanguage". TradeStation Forex don't support third-party platforms (like MetaTrader), and they don't provide an API that would allow custom software of the sort we produce here at the Trading Gurus to use  TradeStation Forex for executing trades.  Even if TradeStation are correct in their expectation that their spreads will prove to be "superior to what is generally available today in the market", I can't help thinking that forcing automated forex system vendors to port their trading strategies to a new platform and a new programming language will prove to be a major obstacle in the way of TradeStation "becom[ing] a dominant brand in the retail forex market".

Be that as it may, there are already a large range of what TradeStation refers to as "Analysis Techniques" coded in EasyLanguage. Here's a simple example of how you can use TradeStation's "RadarScreen" feature to alert you when a trade setup you're fond of occurs on one of a basket of currency pairs:

TradeStation "RadarScreen" for RSI setups

TradeStation "RadarScreen" for RSI setups

That's obviously a very simple example, and you can of course do much more elaborate things with TradeStation 9.0, especially if you don't mind programming in EasyLanguage. The question is how many forex traders and software vendors who can't currently do so will be tempted to learn how. Easy language or not, that is the question?

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The myfxbook blog has just been updated with a new post summarising the results of their most recent MetaTrader 4 trading contest.  It includes a revealing pie chart showing that after 30 days of demo trading,:

  • 7% of accounts were profitable
  • 36% of accounts broke even
  • 57% of accounts were unprofitable
  • 45% of accounts got margin called

Our regular readers will know that Ray the Random Robot likes nothing better than pitting his artificially stupid wits against as many other artificially intelligent "robots" as possible. In this competition he found himself up against discretionary human traders too. Ray didn't achieve his ultimate ambition of finishing in the top 10, but he did manage to finish the competition in 36th place out of 1361, which puts him in the top 3% of all entrants. Here's his equity curve showing how he managed to get into that illustrious position:

Ray the Random Robot's March 2011 myfxbook equity curve

Ray the Random Robot's March 2011 myfxbook equity curve

Just in case you're unfamiliar with Ray's previous exploits, here's how his artificially stupid  bionic brain  has been programmed to behave:

  • A basket of 6 currency pairs
  • Enter almost at random
  • Exit with fixed and equal target and stop
  • Stay in the market almost 100% of the time
  • Martingale money management

If you'd like to investigate further you can download Ray's MQL4 source code from our community forum. Whatever you do don't let him loose on your own live account though. Whatever you do don't let the vast majority of other "robots" loose on your live account either.

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We suggested just after Christmas that FXCM were building an acquisitions war chest, and that's how things are now starting to pan out. At the beginning of this month the Wall Street Journal reported that:

FXCM had agreed to buy the retail trading business of GCI Capital of Japan, adding 20,000 active accounts to the online foreign exchange broker.

Now FXCM have announced in a press release that the deal has been finalized:

FXCM has acquired the retail FX business of GCI Capital Co. Ltd of Japan for $5 million net of cash received, subject to certain adjustments. GCI Capital's retail FX business, which has been operating under the FXCM Japan brand, will provide an excellent complement to FXCM's recent purchase of ODL Japan. The two entities will combine and operate as FXCM Japan, under the FXCM Inc umbrella.

We also suggested not long ago that more forex lawsuits were on the cards, and FXCM has been on the receiving end of another one this month.  According to Michael Greenberg at Forex Magnates an analyst's downgrade after FXCM's recent IPO on top of that first lawsuit led to a fall in FXCM's share price, which in turn led to a securities class action lawsuit against FXCM.

More on FXCM's Rocky Road to Japanese Riches

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I suddenly find myself writing my second blog post of April 1st 2011, and this one is no joke either!  I'm already a  GFT spread betting customer here in the UK, but nobody from GFT called or emailed to give me this news.  I heard a whisper on the grapevine and called my account executive who confirmed that I could indeed open a MetaTrader 4 account with GFT today, as long as I didn't mind parting with at least £150. I said I didn't, and so I am now the proud possessor of a brand new GFT MT4 account. I'm told if you're a GFT client anywhere else in the world you can do this too. Everybody else will have to wait for a few more weeks.

Be that as it may, I soon discovered that the MetaTrader live account opening process is not totally painless at GFT, for people like me at least.  It seems  that as an existing spread betting customer of GFT in the UK I have to go through the rigmarole of opening a completely new spot forex account.  GFT do not offer MT4 spreadbet accounts, whatever your nationality or place of residence might be. In these circumstances you will also be asked to provide your credit card details, because GFT will want a fresh initial deposit for your shiny new non-spreadbet account.  Make sure you fill in the correct application form too. You want the one that looks like this:

More on GFT Launch MetaTrader 4 Softly but Globally

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That prescient title is a quotation from a presentation given by Professor Dave Cliff of the University of Bristol at the Innovation and Algorithmic Trading conference hosted by LMAX at University College London at the end of February. I was sat at the front throughout Dave's talk, and I found myself laughing frequently. Perhaps for that very reason any shots of the back of my head have been left on the cutting room floor in the videos that have just been made available on the LMAX Trader community website. Here's Dave's extremely interesting and even more amusing presentation from that event on the subject of "Robot traders and evolving markets":

Here are Dave's take aways (at around 27:00) to try and tempt you to watch the whole thing from start to finish. You won't regret it, I promise!

  • Algorithmic trading is here to stay
  • Human traders are an endangered species
  • Machine optimised algorithms are the future
  • The global financial markets are a large scale complex IT system
  • A wind tunnel is a useful thing… but it tells you nothing about whether Gower Street will be congested at 5 PM
  • We need system level simulations too

Here's the UK Government project that Dave refers to at the end of his talk – Foresight Project on The Future of Computer Trading in Financial Markets and here's why he thinks it's important:

As far as I know no one has a tool for measuring tail risk at the systemic level (32:45)

That is no joke!

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Citi announced in a press release earlier this week that us poor souls from the UK would have to wait no longer to be able to use the CitiFX Pro platform. According to Citi’s Manager of Margin Foreign Exchange for Europe and the Middle East, Sasha Serebrinsky:

The UK launch of CitiFX Pro offers UK-based clients all of the advantages of trading FX through a global leader, including excellent liquidity and access to its highly regarded research and market commentary. We offer experienced individuals and small institutions a flexible product with tight pricing, which could make a difference to our clients’ bottom line.

Here at the Trading Gurus we're into automated trading that completely ignores "the fundamentals" and doesn't make a whole lot of use of  standard technical analysis either, so the research and market commentary isn't of much interest to us, however highly regarded it might be by others. Access to "excellent liquidity" most certainly is of interest though. The first catch is that before you can discover how big a difference all that lovely liquidity might make to your bottom line in practice you have to be able to stump up at least £7,500, and satisfy the FSA's definition of a "professional client" as required by the MiFID legislation.  Assuming you can do that Citi will let you loose on one of their four available trading platforms.  However if you're into automated trading as we are you need to be more than a mere "professional" if you want to use anything better than MetaTrader 4 as your API.  If  you want access to Citi's alternative FIX API you need to be "an institution".

If you're merely interested in manual trading however, then your £7.5 grand up front will get you access to the CitiFX Pro platform. That comes in 3 flavours – desktop, mobile and web. The technology is actually supplied to Citi by Saxo Bank, and so the web platform is very similar to the MSN Trader platform that launched at the end of last year.  Here's a quick look at what the desktop client looks like:

More on CitiFX Pro Launched in the United Kingdom

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Last week the NASDAQ listed TradeStation Group announced that:

With the launch of [its] new TradeStation Forex business, TradeStation will have transformed its forex offering from a fully disclosed operation, where it introduces customers to a third-party forex dealer, to one where its new subsidiary, TradeStation Forex, Inc., an approved Retail Foreign Exchange Dealer (RFED) and member of the NFA, acts as principal and directs aggregated pricing to its customers.

The third-party forex dealer referred to in the announcement is currently GAIN Capital, and TradeStation will shortly be cutting out that middleman and dealing directly with a number of liquidity providers.  Retail forex traders will be able to use the recently introduced TradeStation 9.0 platform to access that liquidity, and the announcement also stated that:

Our forex customers will now be able to trade forex with no platform access or forex data fees, no lot restrictions, 50:1 leverage for the popular currency pairs, and tighter spreads that include a reasonable mark-up.

so there will be no commissions to pay either.  Of course it remains to be seen just how tight those spreads prove to be.

The same press release also announced that TradeStation had been invited to ring the NASDAQ opening bell last week. In his speech at that ceremony TradeStation Group's Chairman and CEO Salomon Sredni said that:

Within the next few weeks we're scheduled to release a major important restructuring of our forex business.

and that:

We think our new forex offering will be the best choice available to the forex retail market.

It also remains to be seen how long a period of time "a few weeks" turns out to be, and whether retail forex traders ultimately agree with TradeStation's own assessment.  However  the TradeStation platform has been providing traders with access to exchange traded stock, futures and options markets for 20 years now, so they do have considerable experience in such matters. Whilst the new version does show its age in some ways, TradeStation have managed to add object-oriented features to their EasyLanguage automated trading system development language, whilst maintaining backwards compatibility with a huge existing codebase far better than MetaQuotes have managed to achieve with their new MetaTrader 5 platform. Whilst MT5 is also supposed to be able to provide retail traders with access to other asset classes apart from forex, the platform is currently still undergoing apparently interminable beta testing so it's rather difficult to assess how this particular object-oriented war might pan out. It certainly looks as though TradeStation 9.0 will have a big head start, but it does have one significant disadvantage. Only one broker currently provides the TS9 platform, and that is TradeStation Securities Inc. I assume that as and when MT5 eventually emerges from testing it will be offered by rather more than just one or two brokers.

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It didn't take long for the next forex lawsuit to arrive, and from the same source too! Following on from their action against FXCM, the Business Trial Group of Morgan & Morgan, P.A. has announced another class action lawsuit, this time against FXDirectDealer, LLC (more commonly known simply as FXDD).  According to the announcement the plaintiff this time around is Hugo Cruz, and once more the suit accuses:

FXDD of fraud by misrepresenting its trading platform as one that is free from dealer intervention or manipulation.  Instead, Cruz alleges, FXDD uses a number of devices and tricks, including software applications, designed specifically to manipulate and interfere with customers’ trades.

Like the FXCM case, the suit alleges that FXDD uses specially designed software to manipulate trading and “loot” its customer accounts, and also that FXDD lures its customers by promoting a  “demo account,” which was touted as  providing customers with a true market trading experience. Instead, the suit alleges, the demo account does not reflect what FXDD does when the customer begins “live” trading.

I can't help but wonder if these forex class action suits are like London buses? You wait ages for one, then three come along in quick succession.

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The OANDA version of MetaTrader 4 has been in beta testing for a while now.  It sounds as though that testing is now finished, because today OANDA have announced that it is now possible to use MetaTrader 4 on a live  fxTrade account. I can't find an online version of the press release, so here it is in full:

NEW YORK—February 15, 2011—OANDA Corporation, provider of innovative online forex trading and currency data services, now offers its competitive advantages to traders who use MetaTrader 4 (MT4). When they set up an OANDA trading account or demo account, MT4 traders can continue to use their favorite MT4 tools and benefit from OANDA’s tight spreads, quality fxTrade execution, and transparent business model.

MetaTrader is an electronic trading platform with automated trading capabilities; OANDA has licensed this software to be used with market-leading OANDA Spreads®. The OANDA fxTrade platform bridges directly to MetaTrader using custom technology, which helps keep costs low for traders because there are no third-party fees to link the fxTrade trading engine with the MT4 user interface. OANDA will not use the controversial MT4 Virtual Dealer plug-in, which has been criticized for enabling dealers to bet against clients—a practice that goes against OANDA’s policies of transparency and fairness.

“OANDA has licensed MetaTrader software to offer traders more choice,” said Michael Stumm, CEO of OANDA Corporation. “Many of our clients who use automated trading strategies have asked us to support this popular trading platform, and I’m pleased to say we’re now able to offer them the best of both worlds.”

Notice a couple of points that OANDA are making. They explicitly state that their implementation does not use the MetaTrader 4 Virtual Dealer plug-in that got GAIN and Ikon into trouble with the NFA last year. They also mention that they developed the MT4/fxTrade bridge themselves, so unlike many of their competitors they have no need to pay a portion of their spread to third-party bridge software suppliers.

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