Forex Auto Trading Systems

I know that it is often said that there is no holy grail when it comes to forex trading, but to my mind, an automated forex trading system that has a 90+% success rate has got to be about as good as it gets.
Why? Because as human beings we have limited time, and lets be honest here, most of us are not attuned to the sophisticated calculations required for manual forex trading, so even if forex robots don’t get it right all the time, if they can close off their losses pretty smartly, most people should be happy with that.

So is Primeval EA that perfect EA? Well, time will tell, how it fares over a longer period, but so far I can confidently say that it is without exception the best expert advisor I have tested so far. Click here to view this week’s trading stats.

I have come to the decision this week, to turn off both EA’s on my live account for the foreseeable future, until the drawdown on the account is reduced. The Robominer II EA on the AUDNZD chart has already been disabled for a week.

The reason for this is not so much a lack of confidence in the robots’ abilities, but a recognition of the limitations of using an EA to trade a relatively small live account. When I contacted Forex Goldmine support about the warning displayed on the chart that the account balance was too low to trade safely, and asked them whether $1000 was a safe amount to trade, this is the reply I got:

“Please take that warning seriously. If your account has standard lots, then you should have a balance of at least $2300 to trade .01 lots of just the AUDNZD pair or $4000 for both pairs. There can be many 0.01 lot trades opened over time, and they add up. That is why we strongly insist that users follow the balance guidelines. Doing any less is not trading the system correctly and could potentially lead to a margin call.”

So as I am not prepared to risk more than $1000 on this initial account (and I am sure that there are many traders out there who are in a similar situation) I have decided that the only way to limit the risk is to reduce the number of trades by shutting down not only the Robominer II but also the No Loss Robot for a while. I currently have 12 trades open in the market, a total of 0.12 lots or AUD$1200 in currency on margin.

To put that in perspective, that’s the price of a cheap used car where I come from! Of course the fluctuation in currency prices is small enough that the total drawdown at present is only $242.32, but given that I should probably have at least $10,000 in this live account when I take into account the 9 currency pairs which the No Loss Robot could potentially open trades on, I think it is prudent to pause the EA’s until the number of open trades is reduced. The AUDNZD is currently trending long against the Robominer’s sell strategy on this pair, and although the EURCHF has turned around and is now heading in the right direction, I am happy to sit back and watch the trades for a while, with take profit stops in place, and allow the market to take its course. If I left the EA’s online they could potentially open another 12 trades in the next few weeks, and if the AUDNZD continues trending that could open me up to the risk of a margin call.

The No Loss Robot has 4 trades open at the moment, on AUDUSD, NZDUSD, USDCAD and USDCHF. The AUDUSD and NZDUSD are currently trending short against the No Loss Robot’s long trades, and the USDCAD and USDCHF seem to have peaked and may now be ready to go back in the right direction for NLR’s short trades. I guess the rally in the USD was shortlived, or at least that’s what I’m hoping!
Either way, I believe I can ride out the storm if I batten down the hatches!

I commenced live trading this week and Robominer has already closed 3 profitable trades, for a total of $7.02 which extrapolated over a year equates to about 35% per annum. Not bad considering that I set a 115 pip trailing stop on one of the trades and it closed with only $0.65 profit. Ah, the psychology of live trading! If I had left it alone the trade would have made its full 400 pips resulting in about $3.20 like the other 2 trades, so the ROI would have been 48% pa. I also turned off Expert Advisors after a couple of days as I was nervous about trading during the holiday period. As it turned out there was some strong trending on both AUDNZD and EURCHF so I probably could have made more but thems are the breaks. I’ll turn the robots back on in the New Year when trading resumes after the holiday weekend.

The No Loss Robot got off to a bad start. I couldn’t figure out why it had not initialized on the charts I set it up on. A trap for new players: I copied the ex4 file to the experts directory but did not run the installation exe file to install all the other files required to run the robot. It looked like it was installed as I had previously had the demo installed there but obviously that exe file needed to be run again to make everything good. By the time I realised what I had done and fixed it, I decided not to trade for the remainder of the week, again because of the holiday period.

I also got a warning on the chart when I installed Robominer, that the account balance was too low to trade safely, so that is a concern especially as I was contemplating running No Loss Robot on 9 different pairs as well as Robominer on its 2 pairs. Although I am reasonably happy to take the risk of running Robominer on a $1000 account at 0.01 lots, I am probably pushing my luck running both robots at the same time on the same account. So I’ll have to consider whether to top up the account or take the risk.
Or alternatively just run one robot at a time. This is not a problem you have on a demo account where you can create as much free money as you like and run separate accounts. With real money you have to consider your budget and how much you are prepared to risk. So again the psychology of live trading comes into play.

So watch this space. I will report progress as it happens…

On November 9 I began testing on a new EA brought out by Don Steinitz of www.forexrobottrader.com. It is the No Loss Robot and can be found at www.forexrobotnoloss.com. This robot (the name says it all) uses a no-loss strategy similar in some ways to the Robominer. In fact, the no-loss strategy is about all that they have in common. No Loss Robot can be traded on any currency pair although the designer recommends those pairs which offer a relatively low spread for obvious reasons.

I am trading the No Loss Robot on 10 currency pairs suggested by Don Steinitz, and they are:

EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CAD, USD/CHF,  EUR/CHF, EUR/JPY,NZD/USD, CHF/JPY

By the way, all credit to Don Steinitz who was generous enough to allow me to test this robot free of charge. Most marketers of these EA’s don’t back their systems in this way so I am pretty confident that the trading results I have achieved so far will be sustainable.

As a side note, the robot appears to be a development of the MTF HAS expert advisor which has been available from www.forexrobottrader.com in the past, but with No Loss Robot it seems more attention has been paid to money management. Gone are the large drawdowns and losses of the past, in fact so far I am impressed that even with trades open on 10 currency pairs, the No Loss Robot is running less of a drawdown than Robominer. In addition (probably because there are more trades out there on 10 currency pairs as opposed to 2 with Robominer) the robot is making more trades, and, so far more profit in a shorter period of time. Time will tell, however, if this is sustainable with the more volatile currency pairs traded by No Loss Robot.

One thing I do like about the No Loss Robot is that it is possible to trade the minimum 0.01 lot size and still make a good profit. What this means is that one can potentially start with a smaller deposit. Personally, given the volatile nature of the forex beast however, I would not recommend anything smaller than a $1000 deposit. We’ll see how the test deposit goes over the coming months…

Why Aren’t More People Forex Auto Trading?

Over the last 5 ½ months since I started paper trading with Forex Goldmine’s Robominer, I have experimented with settings and have now, I believe arrived at an optimum setup for realistic returns from this forex robot, or expert advisor program as it is correctly called. Overall, the ROI (return on investment) at the date of this post, is about 13% for the period traded, which equates to about 30% per annum. This result in itself is worth the effort but in no way reflects the full potential of this robot. As an indication of what is possible, in the last 1 ½ months, since I settled on the optimum lot size to trade on Robominer, the ROI was nearly 50% which extrapolated works out at about 400% per annum. And that is without taking compounding into account. Given that this return equates to more than 1% per trading day, by incrementing the lot size and thus the eventual profit, each time the account balance increases, it is theoretically possible to make much more than 400% per annum.

As I mentioned in a previous post, $1000 compounded at 2% per trading day would turn into $20 million over 2 years. Of course, the compounding effect of trading with this robot is not as straighforward as making a simple mathematical calculation, like the banks do when they calculate interest. Because each trade can take up to a month or more to close in profit, there is a lag in the compounding effect which effectively means that the account balance will grow in leaps and bounds rather than consistent growth on a daily basis. Nevertheless, compounding does happen, and when you consider that only $1000 starting capital is required, even a return of say $1 million over 2 years is a staggering amount to make for that kind of investment.

Which brings me to the question which makes up the title of this post. Why aren’t more people forex auto trading? I suspect there are a few valid reasons, and some pyschological reasons which are perhaps not so valid. One valid reason is the risk involved. This is not a risk-free investment. It is however in my opinion a low enough risk to take given the rewards involved. Another reason might be the effort and time involved in setting up and monitoring the program. While it may not be as easy as putting the cash in a so-called “high interest” savings account, once the initial setup is done, there is not as much work involved as there is in trading forex, eminis or stocks manually. In fact, you don’t have to give up your day job or lose sleep sitting up late into the night watching the markets, waiting for a buy or sell signal, as many traders believe is necessary to make a living from the financial markets. I myself spend a few minutes a day before breakfast and after work, basically just checking to see if any trades have closed, and adjusting the lot size using a spreadsheet I have set up to calculate what it should be according to the current account balance. I also spend some time saving the current trading results once a week and posting them on this blog on the Trading Stats page.

Another reason may be that the average punter is not able or willing to invest $1000 which may represent 2 weeks pay for the average worker. This is a reasonable objection given the financial pressures which are brought to bear by the banking system on people who have outstanding debts such as credit cards, mortgages, car loans etc to pay off. There would be a big temptation to trade a smaller amount such as $50 or $100. This is NOT a good idea as the chances are, you WILL lose it due to the risk management profile of an account that size. Given that the minimum lot size on a micro forex trading account is 0.01 which equates to $100 of currency in the market, and given that Robominer opens multiple trades over a period of time, this means that if for example you had ten 0.01 trades open in a $100 account, a price fluctuation of 10% would wipe out your account. In fact, your broker will not let that happen and will start closing trades at a loss well before you get to that stage, essentially defeating the Robominer’s no-loss trading strategy.

PIPS Club

So what’s the answer? Well, short of suggesting that people go out and borrow $1000 on a credit card and take the plunge, there may be a way to invest a smaller amount such as $100, and still get a strong ROI. What I am planning to do, to help people who are interested in forex auto trading, is to start a profit-sharing club called PIPS Club (Private Investment Profit Share Club) where there is a guaranteed ROI over a period of months and the owner of the profit-share can then use the funds to start trading their own Robominer EA. What I am suggesting is a minimum profit share of $100 which will mature after 12 months at $500. That amount would cover the cost of a lifetime licence for Forex Goldmine’s Robominer. Another 2 profit shares would cover the cost of the initial trading deposit. Alternatively, if someone wanted to take the risk, they could conceivably just trade $500 and cover the ongoing cost ($39) of a monthly Robominer licence themselves. So for an outlay of $100, after 12 months the PIPS profit share owner would have a growing forex account starting at $500 and potentially growing at a rate of 1% per day.

One of the interesting things about forex trading is how much you learn about human psychology. In the last few months since I started paper trading forex with Metatrader, first by myself then with an expert advisor, I have learned a lot about the way I think and react to my successes and failures in the financial markets.

“Pulling the trigger” is a phrase that traders use in regards to taking the action of placing a trade. Now when it comes to using an expert advisor or “forex robot” as they are called colloquially, the action of placing a trade is taken by the computer program. However, a far more consequential decision is the decision to purchase the live version of an EA and actually start live trading.

I myself have not yet taken that decision, and for a number of reasons I am glad I have waited to perfect my strategy before rushing out and letting a robot loose on my live account. The main reason is that, before I started I had no idea just how easy it was to make a rash decision like cranking up the lot size on my account without thinking about the consequences. On the other hand, waiting too long to get into the market can also be counterproductive. Time is money, and no more so than when you are forex trading. Compounding your trading profits takes months, and the sooner you start the sooner you can reap the benefits of your forex robot.

So I will wait until the graph below shows consistent upward progress for a few more months, and then commence live trading. There are 24 members who have taken up a free membership with Forex Goldmine since I joined their affiliate program and placed links on this blog, some of whom are  presumably testing the free demo version of Robominer, so I hope if any of you are reading this post, that you would feel free to contact me or comment on this blog as I would be keen to know how your trading is going and when you go live, to share in your progress.

I know it could be a challenge for some to have a computer set up online 24/5 for trading. I myself never throw away an old PC while it is still working, so I just use an old one with a RAM upgrade which surprisingly works quite well with the Windows 7 Pre-release beta version installed on it, and it just sits in my garage trading forex for me while I am at work or asleep. With a wifi modem it’s pretty easy to have it online without affecting other computers in the house, and I’m sure one of these days it will pay its way! It may even pay for a full version of Windows 7 for itself before the beta version expires!

So, whoever pulls the trigger first, please post on this blog and we’ll see who hits the target. Perhaps not $20 million but even a real profit of $2000 or even $200 on a smaller account, should be achievable before the end of the year. Watch this space.

If there is one thing I have learned in the last 4 months while paper trading the Forex Goldmine EA, it is that the more I try to hurry it along by investing larger amounts, the more counterproductive that is to my long term profit targets. That’s what I mean by “less is more” – the less you invest in each trade the more you make in the long run.

Since reducing the lot size to 0.2 lots per $10,000 on the 3rd of September, there has been an increase of  over $1000 in my account even if I don’t include the larger trades that I opened before the wipeout on the 2nd. That is an increase of more than 10% in less than a month. I now have a minimal drawdown of about $200, or just over 2% of the account, so can look forward to a similar growth pattern over the next few months.

So what is the moral of the story? Just build your account trade by trade and be patient. I estimate that even if I had left my Robominer trading at the minimum lot size of 0.01 I would probably have more in my trading account now than I have as the result of boosting it up to 1.o when I did. Even 0.5 was too high.

Let’s face it, if I had put $8000 in a bank term deposit a month ago I would now have less than $50 interest. So why would I complain about “only” having gained $1000? Putting these figures in perspective helps me be patient with my trading.  And of course having a paper trading account to play with makes the whole testing process a lot less painful than if I had risked real money. And that brings me back to the major advantage Forex Goldmine has over its competitors: the free demo version of Robominer which they are confident enough to let people download for testing purposes. ‘Nuff said.

There is no doubt that forex trading is a risky venture whether you trade by your own skills or use a Forex Robot. But there are ways to manage that risk, and the key method is by minimizing the amount being risked on any individual trade.

I have only been trading for a few months and the reality of just how quickly the market can move against a forex trader creating huge losses, was brought home to me again on Wednesday September 2 2009. On that day, both currency pairs traded by Robominer moved in a contrary direction within the same timeframe, creating the conditions for a massive drawdown on my trading account. The broker then started closing my positions one by one until my account had been reduced from $14,414.38 to $7,634.18. Almost $7000 was wiped off my account in one day.

And the frustrating thing is that this is only the second time within a month that this has happened. When a similar move happened on 31 July, I reduced the lot size I was trading from 1.0 to 0.5 to try and avert another disaster. I did however try to keep the account growing by increasing the lot size in proportion to the account balance.

I have now reduced that ratio to 0.2 lots per $10,000. The main reason I am trying to avoid reducing the lot size too drastically while I am paper trading is that I want to establish a reasonable middle-risk strategy – not overly aggressive, but not too conservative either. When I eventually start live trading this robot it will probably be on a $1k account, and that means that if for example I can establish that 0.2 is a good lot size to trade for $10k, I can start with 0.02 lots with the $1k account, or even start with $500 and trade the minimum 0.01 lots.

In this way I can establish whether this robot is going to be viable for the average everyday investor who may find it tough to find $10k or even $5k starting capital in the current economic environment. Plus, it is not wise to risk money you can’t afford to lose.  Nobody wants to take out a loan for thousands of dollars to trade forex, only to lose it and get stuck with the bill, and working harder than ever when their forex trading was supposed to make life easier by bringing in some easy money.

Add to that the cost of the robot itself (Forex Goldmine’s Robominer is a proven consistent trader but itself costs just under $500 for a lifetime licence) and you can see that the starting costs can add up.

However, I am still convinced that given the potential gains possible utilizing the huge leverage available within a forex account,  it IS possible to use a good forex EA like Robominer to make some serious money online. When I first installed Robominer in May it ran for 3 months without a loss, trading 0.02 lots on a $10k account, and increasing the account balance to about $13k. Only when I increased the lot size to 1.0, did it make its first losses.

So watch this space. I will see how Robominer fares over the next month or so, then decide on a good strategy for live trading.