Today we focus on a very unusual expert advisor -- the GPS Forex Robot, developed by Mark Larsen and his group.
Now, whatever I will say in the following lines would not matter to people who have heard of Larsen before. Every time a forum participant mentions his name, it's generally followed by a story of ruined accounts, failed refunds and crappy software.
Still, I believe it is worth exploring this GPS Forex Robot even for the sake of developing a habit of digging deeper into complex matters -- things that appear bright and shiny on the surface, but are spoiled on the inside.
Let's start with the basics.
The developers of the GPS Forex Robot (variant 2) offer it for sale for $149, and there's a 60-day money back guarantee. Thus far so good -- for this price, we may expect the expert adviser to match the performance of the Forex Growth Bot, or FGB, which costs $129, and the Forex Invest Bot, or FIB,- $197.
More Details: http://www.socialleadfreak.com/gps-forex-robot-review
The cheesy website promotes the GPS Forex Robot as a true miracle maker. Once you apply it to a Metatrader 4 (MT4) account, you will only have to wait for the miracle of 98% winning trades to happen. If this looks too good to be true, that's probably because it is not.
But let us examine the block-buster asserts further. According to Larsen, a reverse strategy enables rapid compensation for losses incurred. Say the robot purchases EURUSD and suffers a loss. Because of this, it will instantly open a reverse trade (sell) -- a strategy known as stop-and-reverse. In fact, that's something quite easy to implement in a software -- even by newbies -- so there goes the"genius" of both developers (Ronald and Antony) accountable for the bot.
The fascinating part about this bot is its approach to increase trade contract sizes. After the EA reverses a trade, it raises steeply the trade contract dimensions -- from 5 to 9 times.
To me, this looks like a Martingale strategy, which is a gaming method, where you begin with a certain bet size, then double it every time you lose and keep doing so until you win, when you return to the original bet size. What is dangerous about this strategy is that it can guarantee certain profits only to gamblers with boundless wealth and there's absolutely no limit on the maximum bet you can make. But if your wealth is limited, which generally is the case with forex trading, or there is a maximum amount you are able to trade (again -- the case with trading), then you might end up buried under the weight of constantly rising bets without an actual possibility to return your losses. That is to say, if you lose more than once, your account will most likely fail.
Let us explore the backtests to see how the peculiar strategy of GPS Forex Robot works.
At a first glance, the picture is rosy, as this incredible robot makes drives a first deposit of $10,000 to a net profit of $100,952. The relative drawdown is at 20%, which is an acceptable risk level. Pay attention, however, that the average profit trade ($219) lags behind the average loss trade ($824)! That is troublesome because a succession of losses can get you into a really deep trouble.
The history of trades is really enlightening, as you can see the odd trading strategy of the robot in action. For instance, on May 27, 2009 there is a heavy loss of $919 after buying 1 lot of EURUSD. The robot immediately reverses the strategy and opens a sell trade but with commerce contract size of 6.8. This time it is a winner -- there's a profit of $904, but such profitable trades cannot be guaranteed.
Forward evaluations: Cradle of Loss
A true account on Myfxbook.com, to which the GPS Forex Robot is applied, provides us with further insight about this EA. The trade is with EURUSD and started on May 21, 2012. Since its activation, the account has registered a gain of 153%, which, given the first deposit of $100,000, represents a whopping sum.
The account hasn't registered one month of declines since its launch, although the growth rate is slowly declining.
A worrying sign is that average pips per trade are in 4.6, which hints in vulnerability to fluctuations in market behaviour. By contrast, FIB's Synergy FX account appreciates average pips per trade ratio of 13.6, while the ratio stands at 6.6 for FGB's account with ThinkForex.
The risk is low, however, since drawdown reaches a good level of 10%, just like that of FIB and much lower (which is very good thing) than the 42% recorded by FGB's account.
The curious part is from the background of transactions as once again we encounter the stop-and-reverse strategy and the specific version of the Martingale method. The robot applies both methods when there are particularly heavy losses. By way of example, following a losing trade (the loss is $10,230) on June 8, 2012, the robot reverses the strategy and increases the trade contract size from 11 a lot to 75 lots. In case the robot had suffered another loss like the preceding one, but with the increased trade contract size, the total loss would have amounted to $71,088. Imagine what would have happened after a series of 6 or 7 losses, or even 20!
If you are acquainted with Isaac Asimov's work, you ought to be aware of the First Law of Robotics -- that is, a robot cannot harm a human being. The GPS Forex Robot clearly violates this law. It could be not harming the dealers, but it's harming their accounts. It is similar to the Rosemary's baby sleeping in the cradle of reduction. You just do not know when the baby is going to wake up and unleash hell.
The funniest thing is that Mark Larsen appears to not care at all about the strategy used by the GPS Forex Robot. In actuality, he's the only person to have rated this EA with five stars, in his own review of this program. Way to go, Larsen! Even if that's the way to hell.
Know your keywords
Expert advisor (EA) -- An algorithmic trading platform for the MetaTrader platform; a trading robot. EA's can be downloaded at no cost or for a fee, or can be programmed in the MQL programming language.
Backtesting -- Testing a trading strategy on past time intervals through a simulation.
Drawdown - A trader's biggest loss for a certain period of time, expressed in pips or as a
Percentage of the trader's profit. The lower the drawdown percentage, the less riskier the trading
Let's say you begin with a balance of $1,000, then make a profit of $1,000, and after that lose $500. Your drawdown will be 25% ($500/ $1000 + $1000 = 0.25 = 25%).
Lot - The standardized contract size of a trading tool. A standard lot Includes 100,000
Currency units, a miniature lot -- of 10,000; a micro lot -- of 1,000 units, and a nano lot -- of 100 units.
If you're buying 1 lot EURUSD at 1.3000 for example, you are purchasing 100,000 Euro for 130,000 US Dollars.
Pip - The fourth digit after the decimal sign of a price quote. For example: if the EUR/USD moves from
1.3350 to 1.3351, that is 1 pip. Pips are used to measure price movement, profit and slippage. https://www.meetup.com/edX-Global-Community/pages/26857418/Can_I_Get_GPS_Forex_Robot/