After testing dozens of forex robots, brainyforex has narrowed down the traits / principles that these EA systems all have. These principles are simple, yet most automated trading system developers don't apply them when building their systems and hence end up failures within a short time thereafter. Watch the 1 minute video below;
The first thing a novice forex robot ea builder concentrates on is accuracy. He believes a profitable trading system hinges all around how many trades it gets right compared to how many it gets wrong.
The novice ea builder reduces his take profit target to a bare minimum of 5 pips profit (or under) while setting his stop loss to around 80 pips, hoping to win most of the trades entered.
We know these type of strategies cannot remain profitable in the longer term because the financial markets create all types of surprises. The market moves in an unexpected direction say two times in a row causing a 160 pip loss in a matter of minutes. How long and how many profitable trades would this system require just recover from this 160 pip loss? That would be 32 profitable trades in a row. (5 pips x 32 = 160). And how much would the trading commissions amount to on all these 32 trades? And lets not even talk about the problem of bad fills / bad slippage that real trading accounts are subject to.
And then the question is; when is the next 80 pip loss coming? Sooner than you think because there was a small program glitch or internet problem that lasted a few minutes, just enough time to cause the loss.
Somebody did actually build and commercially sell such a robot a few years ago. It's called GPS Forex Robot. But if you take a look at its trading results you will notice they are on the low end of commercial systems sold averaging 2% per month. For those interested in viewing statement go to http://www.myfxbook.com/members/ForexMark/gps-forex-robot-fxchoice/301639
Automated trading systems that include longer term direction filters do produce better results than those whom ignore the overall direction. It's no secret that a successful automated trading system that trades off the 1 hour chart includes a daily direction filter.
Not all successful commercial trading systems reveal all their entry & exit filters however it would not be surprising to find out that even weekly and monthly time frames get added into the programming of these systems because that is how the larger successful manual traders operate. These traders need to know where the money is flowing, and they can do so only through the larger time frames.
All the longer term successful forex robots incorporate some form of money management. Some more advanced than others but they all limit risk. Read more about the basics of money management here.
Brainyforex has tested the best martingale and grid systems. They can work for several months at a time with low steady returns but eventually they all seem to get into trouble. Trouble in the form of losing all the accumulated profits over the prior 6 months. Nobody would be happy losing six months of accumulated profits and this sort of thing does happen with these type of unconventional trading strategies.
Short term scalper ea systems should only be traded on commission with 0 spreads, through ECN accounts. Also, a VPS system with fast latency. This speed is achieved by having your forex broker located close to your VPS host.
It's been noticed that commercial scalper robot vendors don't always advise their customers of the operating these systems on the wrong accounts. Maybe these vendors think that it's common knowledge and everyone should know these things? Or maybe they don't want to lose sales and are not worried about the effects of bad review postings that follow when the scalper system loses each and every trade? Or could it be that the vendor is a IB (Introducing Broker) for a Market Maker NON-ECN broker collecting hundreds of dollars in referral fees from new accounts opened? (Some Market Makers can offer up to $800+ for each new account opened).
Visit brainyforex testing page here.
Read more about our consideration of the 2008 winning automated trading systems here.