Forex Trading System - First Impressions
In a previous article, I wrote about Forex Trading Machine. This is a PDF format e-book (and accompanying videos and other materials) that provide one swing trading style “cash cow” system, plus two shorter term systems, all suitable for beginning traders. I’ve now bought my copy and will be researching this system to see whether it works. Generally I am fairly skeptical about commercial systems, so this will be an interesting evaluation.
I haven’t yet started trading with it (the forex market is currently closed), but have now had an opportunity to review the materials and will now make some comments about the quality and my perception of how practical the Forex Trading Machine is in real life trading based on my own experience in developing trading systems.
In fairness to the author, I won’t be discussing too many details of the actual approach - see the link at the end of this article if you want to buy it and find out for yourself.
What do you get?
The main item is a 180 page e-book. This covers a lot of useful background material on forex trading, then it discloses the three trading systems. I expected a very basic exposition of each system, but the book is actually fairly detailed, and includes some indepth examples.
The overall style is very readable and easy to understand. You could pick this up and have virtually no understanding of forex, and come away with the knowledge you need to be a trader.
There are also some videos (in WMV format - I would have preferred QuickTime) and two other e-books - one is on trading the Non Farm Payroll data release, the other is a basic guide to training. I have not yet reviewed any of the other materials. I am unsure whether the two e-books are a permanent part of the offering, or a limited time bonus.
Background information in the e-book
The background information covers:
- Introduction to forex (market participants, how a trade works)
- Reading charts
- Fundamental and technical analysis (support and resistance)
- Trading psychology
- Money management (using stop losses, smooth equity curves, reducing drawdowns)
In summary, the background information is excellent. The concepts are presented clearly so that the average person can learn what they need, not just for this system, but for understanding the overall operation of the market.
Markey psychology is presented in an extremely pragmatic way - nothing too abstract or highbrow. The author makes a good point about it being more important to follow a winning system over time than be right with each trade.
The topic of money management could be quite tricky, but it is presented in a straightforward way. I am glad that this is included, as some trading systems completely omit this vital area. The only topic that I would have liked to have covered is that concept of expectancy. Whilst this is inherent in the trading systems, and the discussions on money management, it is useful in the context of a basic introduction.
Quality of the trading systems - first impressions
In summary, the trading systems are not based on reading chart patterns (although charts are used as a visual aid) or traditional indicators, but by examining price action.
These trading systems are completely rule driven and mechanical. If situation A and situation B occur, then enter a trade with at point C with a stop loss of D and a profit target of E. If the profit target is not reached a certain time then do this, otherwise move the stop to that. Very simple to follow.
The main system, the Forex Cash Cow Strategy, is an excellent approach. Several years ago, I backtested a similar system and although it was not well known, it yielded some very impressive results. My initial impression of the cash cow is therefore favourable. It also lends itself to automation if you use a tool such as TradeStation. This system does not require very much time and is suitable for those who don’t want to spend all their time following the markets.
The system is well illustrated with examples. If you are a more advanced trader, then some options are presented to improve it at the cost of slightly more complexity.
The second system, Forex Runner is similar, but over a shorter timeframe, trading off a 5 minute bar chart. Again, I think the basic idea is sound. I would be prepared to trade this system.
The third strategy is called Flip and Go. It is a bit different to the others in that it involves identification of reversals, which require extremely specific parameters. I do have some concerns over this system. That is because I believe that the pattern may not mean anything, and there are more entry conditions. The entry conditions concern me. I am not completely closed off to the idea, but think it may have limited longevity.
In summary, I like the first two systems, and have some reservations about the third. As yet, I have not traded any of these, so my opinion may change later.
Summary to date
I think that there is some value for money in this system and the bonus materials (which I have not yet reviewed). At least two of the systems appear to be winners, and I’ll consider the third based on how it trades. The overview of forex trading is quite useful, especially for beginning traders, and does not make any assumptions on your skill level.
Based on my initial evaluation, this package appears to be sound and I believe that beginning traders do stand a chance to make money from it. In addition, it is original and not simply a rehash of what we can find out for free from elsewhere. Given my low opinion of systems that are sold over the Internet, I am pleasantly surprised.
If you are interested in purchasing the Forex Money Machine, you can do so here.
I’ll start trading with it on a live account and report back on real life performance over time. Hopefully the real world performance will match my initial evaluation.
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