For those who have been following, I’ve been trying out FXCM’s Forex System Selector with some trading models selected by FXCM.

To date, my experiences have been mixed. Read on to see my final conclusions on whether you should be putting your money into this product.

The final week has finished with a balance of $99,141 (starting balance in the account five weeks ago was $100,000).  So it has lost approximately 1% of equity, which is actually about 100% of the amount traded, since it was trading only single lots.

Trading profits peaked at $3,795 in week two, so the system has lost all the profits made, and more, since that time.  This indicates a very bumpy equity curve.

Unfortunately I have now been locked out of the trial account, so I can’t give you the trades, but the normal pattern of wins and losses continued, with losses exacerbated by opening multiple simultaneous positions.  In the early stages when the system was making profits, there were no multiple positions.  I believe that the level of losses was caused by doubling up the bad trades.  It is the same as managing a stock portfolio – if you allocate a lot of your capital to one stock, you increase your risk.  Otherwise, the bottom line would be a lot better.

In terms of trade execution, the system executed the trades without any need for manual intervention.  The promise of no need for involvement was met.  In addition, stops were placed and enforced.  The main problem was not the trading models, but the lack of control over opening positions.

The majority of trading profits came from a very small number of trades.  I was hoping for a very smooth equity curve, which means positive expectancy on trades, and a consistent contribution to profit from each trade.  This hasn’t been achieved.

Moreover, these systems have generated a vast number of trades.  I would expect that there were over 200 trades, or around 40 a week.  This has made a lot of commission for FXCM but not much profit for the trader.  Ultimately, from FXCM’s perspective, automated trading promises consistent, heavy trading and therefore steady commissions.  In addition, an extra amount is charged for each trade made through the Forex System Selector.  This would not be a bad thing if it was profitable, but when the trading capital is eroded through poor risk control, then it is hard to see the justification for the extra charge.

In conclusion, whilst the idea has promise, the execution of it continues to be poor.  Ultimately, it does not fulfill the promise of easy, automated trading profits.  These problems have been consistent over the two trials of this product, and it is really time to lift the game, stop ignoring the problems and sort out the risk management if FXCM wants this to be a realistic alternative.  At this point I cannot recommend this product to traders.  You are better off developing your own systems and linking in through FXCM’s API.

Tags: automated forex trading, forex, forex system selector, FXCM

This entry was posted on Sunday, November 23rd, 2008 at 2:17 am and is filed under Automated Trading. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.