For those readers who have been following this series, this is week four (probably the last week) of a week by week update on the trading performance of FXCM’s Forex System Selector.  This is web based software that will automatically trade your forex account without any manual involvement.  Too good to be true?  This is what this series sets out to discover.

To date, results have been mixed, and therefore inconclusive.  The trading started strongly, with account profit peaking at $3,795 at week two.  Last week, multiple trades were initiated by the system within seconds of each other.  As has been my previous experience with these multiple trades, these were losers.  These trades decreased account equity to $2,255.

There are trades that are losers even if they book a profit.  These are the stupid trades that increase risk and turn trading from a steady money maker to a gambling game.  These trades were not just losing trades (in that they severely depleted the account equity) but they were also losers because they were bad, stupid trades that violate trading rules that veteran trades live and die by.  You don’t increase your position, hoping to go “double or nothing” – you stick to the game plan.  These trades didn’t do that.

The profit to date for week 4 is $1,132, but this includes a $528 profit made this morning.  Current open positions show a marked to market loss of $324 (again including two losing positions opened within 1 second).  

You can calculate that from week 2 to week 4, the system has lost over $2,600.  The loss would be more if it was not for the large winning trade today.  

Our original goal was a profitable system that had a smooth equity curve and is stress free.  I am looking for an automated version of a top institutional trader – risk averse and street smart.  Instead we have a horror of a system that has massive swings in its equity due to stupid trading of multiple simultaneous, correlated positions, many losing trades in a row, and any performance seemingly coincidental, and attributable to a few large wins.  

In conclusion, I really can’t recommend FXCM’s Forex System Selector until they remove the ability for systems to open multiple correlated position.  If this was corrected, then the results would be far better and it would be more suitable for the person who wants to trade, but can’t watch the markets all the time.  The results are not good enough for the risk assumed.  Sadly, this is no closer to our goal than it was when I last reviewed it some months ago.

Tags: automated forex trading

This entry was posted on Friday, November 14th, 2008 at 12:35 pm 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.