A bit of Good Friday reading, hope this is OK guys, the thread will no doubt fly a straighter course after the hols...obviously Dirk will be biased, given his mentorship programme, but he reels of some interesting data and IMHO his advice is mostly sound..
The Forex Robot World Cup – Another playground for the forex loser
Recently a large and well-respected forex broker hosted the forex robot world cup (FRWC). The supposed idea was to get all the “top” forex automated trading systems (robots) competing with each other to find the cream of the crop so that you, the retail forex trader could benefit by buying one of these ‘top’ systems.
That was the supposed idea. The real idea was to sell more rubbish to an unsuspecting (or gullible) public. This would come in the form of $995 a pop for the “best” robots as “proved” by the competition.
So it all started with a $150,000 carrot to get computer programmers to give themselves out as traders and experts creating automated trading expert advisors. This created a nice big ticket “product” for the internet marketing boys to sell so they could boast about their last 6-figure payday on their next internet marketing video.
Why do I say this competition is junk? Here’s why:
The first- placed robot (the competition ran over two months only) made returns of 145% with the next best coming at 88% over the same period. Slick marketing told you how rigorous the testing and process was and how you can now buy these robots and trade away to the end of time without having to think too much – for only $995 fee to gain access to the “best of the web”.
I ‘ll tell you in a minute why this is all just the same old hype in a new package but really it is not even necessary for me to go to that trouble if you apply some common sense. Tell me again what you are buying? A forex machine that you plug in and play? Data goes in one end, money comes out the other? Where do I sign up?
Right over here please, along with this long queue of suckers.
Ok, don’t believe me? Well tell me this then. What on earth are they doing closing subscriptions to purchase the top robots after only a few weeks on the market? I mean these guys are sitting on the hottest money making machine ever invented by man. Here is a robot that can return more than 1000% a year. If you start today with $1000 you will be able to retire with $100,000,000 after five years of leisure.
Is anything adding up for you yet? No?
All right, try this for size. Fact – nine out of ten forex traders fail. This competition took the 329 “best” robots, in other words, the one in ten principle would deliver 30 positive results. Let’s say 32 out of the 329 robots. And what did they get? Ten percent? Five percent? Not even. About 3% of all the “best” wannabees made positive returns.
Do you know what these guys are selling? Really selling? I’ll tell you. They are selling your perfectly good democratic right to be ignorant and lazy. Lazy because you don’t have to think, the robot will do that for you. Ignorant because everything they say and do is premised on a misconception of how the forex market works.
C’mon guys, I mean really.
If you take a couple of hundred trading robots, someone is going to give you extraordinary returns over two months. It is a natural bell curve. Over six months that bell curve will flatten out and after a year the picture is going to look a little sick for the forex robot believer. Do yourself a favour. Ask them to run the competition with this year’s winner for twelve months instead of two months, and see what they say.
What happened to the most revered adage of “past performance is no indication of future performance”? On what basis can you value the performance of a few randomly assembled computer programmes seeking patterns in the sea of currency price data over two months? How can this ever have any meaning in determining potential long term returns? Odds are even that the worst of these robots and the best of them over the first two months will have changed places in two years, or most likely, both will have converged to zero returns.
In effect what they are saying is that it is possible to reduce the most complex, liquid, biggest market ever to exist to binary code, let a computer programmer who doesn’t know his Euro from his Yen, put it in a trading robot and make money. That’s how predictable the forex market is according to them. If you want to carry on believing that then I think that there is nothing that will ever stop you except a big hole in your bank account, and even then… But if you don’t believe me that this is a recipe to lose money, buy a robot, let it run for a year or two and see for yourself.
Oh sorry I forgot, you can’t. They aren’t selling them anymore.
If you disagree with me, tell me why. Convince me that I am the one talking rubbish. But if what I am saying makes sense to you then you are probably a Bird Watcher already, or fast on your way to becoming one.
http://www.dirkdutoit.com/blog/?p=336#more-336
