And Then There Were Non...
As you may know from my previous posts about the way in which expert advisors are reviewed by most independent testers and forums, I strongly disagree with the way in which the evaluation of trading systems takes places. The reasons for this range from the sometimes mindless testing to the "test and drop" tactics used by many of these expert advisor reviewers. From now on I will refer to "expert advisor reviewers" as both people who have websites that review experts and people in forums who review free or commercial systems.
Today I want to write about a phenomena I think is happening and will happen in the future with most independent testers in the world of foreign exchange automated trading. This phenomena, which is related to today's post's title is related to the fact that most expert advisor reviewers follow a "learning" curve which eventually leads to a total lack of expert advisors to evaluate and a complete lack of interest in the testing of long term profitable expert advisors.
For me, expert advisor reviewing happens to most independent testers in "stages" or "steps" . The first step, which is when people start to test many expert advisor systems is what I call the "charmed" phase. Along this step, an EA reviewer becomes very excited about testing systems and decides that his objective will be to find a profitable expert advisor, note that no strict criteria for a "profitable" expert advisor exists for them and most of the time, these reviewers base their evaluation on their personal criteria which, more often than not, is not geared towards what is considered by me (and experienced traders) as "long term profitability", in fact, most of the time this criteria is even fairly opposite to that.
After testing a whole bunch of experts, the reviewer goes through the next phase which is what I will call from now on the "elimination" step. In this step, the expert advisor reviewer "eliminates" trading systems that do not fulfill his criteria for "profitability", most of the time long term profitable experts are eliminated in this phase as they almost all the time fail to generate short term profits of such magnitude as those generated by unprofitable systems like grid trading system, Martingales and scalpers (note that eventually these profits will all be given back by unprofitable trading strategies). The key factor here is that the elimination phase usually happens within less than a year. That is, experts don't have any opportunity to show their potential, even more, most reviewers don't seem to have a criteria in the aforementioned charmed phase in which they can decide which experts are and which ones are not worth evaluating.
After the elimination phase, most of the time only experts with very unsound trading methodologies, which were the experts able to generate high short term returns, are left. These experts generate profits for even one or two years (best case) after which they wipe accounts. Here is when most expert advisor reviewers enter what I would call "desperation". In desperation, the EA testers find themselves with no expert advisors and with the possibility of doing one of two things. They can return to the "charmed" phase and get new experts and repeat the whole process or they can go another way and start analyzing what really made each expert they evaluated trade like they did. After this, the EA reviewer can build a real criteria for long term profitability and start analyzing systems before committing time and resources to experts they know are not long term profitable.
Several expert advisor reviewers are near their desperation phase right now and I am very interested in what they will do to move forward. It will be very interesting to see other people's criteria for long term profitability as well as their own programming and trading systems evolving out of this.
Sadly, in the end most reviewers just throw the towel with the firm belief that it is impossible to find a trading system that is long term profitable. However, I have learned, through the whole process above, that such profitability is achievable and that reliable testing and evaluation has to be done in a deep and critical level. If the evaluation of experts and the building and trading of long term profitable systems interests you please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !
Today I want to write about a phenomena I think is happening and will happen in the future with most independent testers in the world of foreign exchange automated trading. This phenomena, which is related to today's post's title is related to the fact that most expert advisor reviewers follow a "learning" curve which eventually leads to a total lack of expert advisors to evaluate and a complete lack of interest in the testing of long term profitable expert advisors.
For me, expert advisor reviewing happens to most independent testers in "stages" or "steps" . The first step, which is when people start to test many expert advisor systems is what I call the "charmed" phase. Along this step, an EA reviewer becomes very excited about testing systems and decides that his objective will be to find a profitable expert advisor, note that no strict criteria for a "profitable" expert advisor exists for them and most of the time, these reviewers base their evaluation on their personal criteria which, more often than not, is not geared towards what is considered by me (and experienced traders) as "long term profitability", in fact, most of the time this criteria is even fairly opposite to that.
After testing a whole bunch of experts, the reviewer goes through the next phase which is what I will call from now on the "elimination" step. In this step, the expert advisor reviewer "eliminates" trading systems that do not fulfill his criteria for "profitability", most of the time long term profitable experts are eliminated in this phase as they almost all the time fail to generate short term profits of such magnitude as those generated by unprofitable systems like grid trading system, Martingales and scalpers (note that eventually these profits will all be given back by unprofitable trading strategies). The key factor here is that the elimination phase usually happens within less than a year. That is, experts don't have any opportunity to show their potential, even more, most reviewers don't seem to have a criteria in the aforementioned charmed phase in which they can decide which experts are and which ones are not worth evaluating.
After the elimination phase, most of the time only experts with very unsound trading methodologies, which were the experts able to generate high short term returns, are left. These experts generate profits for even one or two years (best case) after which they wipe accounts. Here is when most expert advisor reviewers enter what I would call "desperation". In desperation, the EA testers find themselves with no expert advisors and with the possibility of doing one of two things. They can return to the "charmed" phase and get new experts and repeat the whole process or they can go another way and start analyzing what really made each expert they evaluated trade like they did. After this, the EA reviewer can build a real criteria for long term profitability and start analyzing systems before committing time and resources to experts they know are not long term profitable.
Several expert advisor reviewers are near their desperation phase right now and I am very interested in what they will do to move forward. It will be very interesting to see other people's criteria for long term profitability as well as their own programming and trading systems evolving out of this.
Sadly, in the end most reviewers just throw the towel with the firm belief that it is impossible to find a trading system that is long term profitable. However, I have learned, through the whole process above, that such profitability is achievable and that reliable testing and evaluation has to be done in a deep and critical level. If the evaluation of experts and the building and trading of long term profitable systems interests you please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !
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