As our regular readers will know we were not awfully impressed with the Forex Espionage MetaTrader robot (or should that be robots?). Nevertheless immediately after I bought his latest expert advisor(s) Steven Lee Jones was kind enough to make me a "One Time Offer" to buy his Forex Espionage Advanced System for a mere $77. Unable to resist any sort of an offer to buy anything related to forex trading, let alone one just about to expire, I parted with my credit card number for a second time.
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Another new MetaTrader 4 expert advisor launched last week. Since it's name is "Forex Espionage" I was astonished at the lack of secrecy surrounding this event. Even I noticed all the emails accumulating in my spam folder. Normally when we here at the Trading Gurus review a new trading system we perform lots of backtests, forward test on a demo account for a few months, then forward test some more on a live account before delivering our final verdict. In the case of the latest forex "robot" let loose on unsuspecting trading accounts around the world all that won't be necessary. Here is our considered Forex Espionage Review. It Sucks!
Why do we say this with such conviction? Take a look at our backtest results below. Compare them with the results on the Forex Espionage sales letter. Do you see any similarity? I don't.
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In the second of our series of interviews with senior figures from the Forex industry, I spoke earlier today with Marc Prosser, Chief Marketing Officer of Forex Capital Markets. I started off asking the question on everyone's lips these days about the new "hedging" ban. We then talked about the relative merits of "straight through processing" versus "dealing desk" business models, and then briefly touched on the regulatory aspects of transatlantic transfers of client cash.
Firstly I asked how the NFA's new compliance rule 2-43(b) had affected FXCM's business, and in particular whether their UK business had experienced an influx of deposits from the US.
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Here at the Trading Gurus we've been testing our three example MetaTrader expert advisors with another month's worth of data. Things are still looking good for our dumber than dumb forex robots!
If you remember, our first EA had a 100% record for the first quarter of 2009. I am happy to report that every trade in 2009 has been a winner for the robot created to implement a trading system that uses random entries. Here's the up to date equity curve:
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Here are our Forex MegaDroid backtest results for May. The distinction may not be obvious, and may even seem irrelevant, but nonetheless although these are backtest results, the data used for the backtest was acquired on a demo account moving forward in time and not from a downloaded MetaTrader history. This test was performed using exactly the same input settings as in our MegaDroid Backtest Results for April.
As you can see, using the default input settings in version 1.11 of the Forex Megadroid expert advisor with a $500 account, the "robot" lost $6.47 in May 2009, compared to a gain of $73.76 in April. Note also that the total number of trades in the month appears to be reasonably constant, having reduced from 19 in April to 18 over the last month.
Here are our results from the MetaTrader strategy tester for Forex MegaDroid during the month of May 2009:
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I took part in a discussion over at the Forex Magnates site, where some traders expressed the view that "Greed is Good" and "There is nothing wrong with greed. Greed means you want things". I disagree. I don't think it's that simple. I think that greed at the corporate level is not good, and that greed at a personal level is not good, especially if you're a trader. I'm not the only one.
Here's an hour long video recorded at the Edge "Reflections on a crisis" event held in Munich earlier this year. In it Daniel Kahneman, psychologist and winner of the Nobel Prize for economics, and Nassim Nicholas Taleb, rogue options trader and author, discuss how human failings and corporate greed led us into the current economic crisis:
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As you know, I was idly perusing the Boston Technologies website the other day when I happened across their very own MetaTrader robot, which seems to have developed an unfortunate habit of losing money rather than making it hand over fist.
I happened across some other interesting stuff over there too, including instructions on how to start your own forex brokerage, with Boston Technologies able assistance of course. Apparently:
Boston Technologies is working with companies such as FXCM, Gain Capital, ODL, Alpari, MIG, Interbank FX, and FXDD to create the most competitive Retail Forex business in the world. We couple the immensely popular MetaTrader4 Platform, our extensive partner network, and our own innovative technology to start organizations off with the right foundation needed to succeed in retail forex.
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Prompted by a comment from Michael to a post about the hedging ban, here's some more information about regulated alternatives to over the counter retail forex.
The Chicago Mercantile Exchange (CME for short) first introduced currency futures contracts back in 1972. These "full-size" contracts were traded using the venerable open outcry method, which involved traders gesticulating and shouting at each other across a trading pit.
In 1992 the CME introduced its Globex electronic trading platform which led to the introduction of the "E-mini" electronically traded contract. An "E-mini" currency futures contract is 1/2 the size of a full contract. Then, earlier this year, the CME introduced a new "E-micro" contract only 1/10 the size of a full contract, specifically designed to appeal to the retail investor.
Bear in mind the rather confusing terminology here. In OTC forex a mini-lot is 1/10 the size of a full lot. In OTC forex a micro-lot is 1/100 the size of a full lot. An E-micro is therefore roughly equivalent to a mini-lot. I trust that's clear!
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I've just put the phone down after a long conversation with George Tchetvertakov, head of market research at Alpari UK. We started off talking about the new NFA "hedging" regulations and their effects on the retail foreign exchange business. Eventually we moved on to discuss some other topics, including using hedging as a means of reducing risk, and George's opinions about markets in general.
I asked whether Alpari UK had noticed an influx of funds from the United States following the introduction by the National Futures Association of compliance rule 2-43(b). George said categorically no. Alpari US, Alpari UK and Alpari Russia are three separate companies, with different offices, different staff, and different servers. The 3 companies have some shareholders in common, but were otherwise completely unrelated. Alpari had sought advice from the regulators and on the basis of that advice Alpari UK did not accept US residents as customers. Whilst he couldn't quantify it, he felt that they had, however, received some new business from UK residents moving their accounts to Alpari UK from US brokers.
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I telephoned FXCM again about my latest problem with an expert advisor that was unable to place any orders. I eventually managed to speak to a very helpful lady with an American accent who is a MetaTrader specialist in their sales department. She'd obviously been asked this question before, and here is my understanding of her explanation.
- Although FXCM Ltd. have a UK office and are FSA regulated their servers are in the United States.
- The software on those servers is in the process of being revised to comply with the NFA's new hedging regulations.
- In order to comply with the first-in first-out aspect of the new NFA rules FXCM's MetaTrader platform currently rejects orders that include non-zero stop-loss or take-profit levels.
- To get around this you need to place an initial order with no stop or limit, then as soon as possible thereafter modify that order with your desired stop-loss and profit target.
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