Today we concentrate on a really 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 is usually followed by a narrative of ruined accounts, neglected refunds and crappy software.
Still, I believe it’s worth exploring this GPS Forex Robot for the sake of creating a habit of digging deeper into complicated matters — things that appear bright and shiny on the surface, but are spoiled on the inside.
Let us start with the fundamentals.
The programmers of the GPS Forex Robot (version 2) offer it for sale for $149, plus there is a 60-day money back guarantee. Thus far so good — for this price, we might expect the expert advisor 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
Don’t Go Chasing Waterfalls
The cheesy website promotes the GPS Forex Robot as a real miracle maker. As soon as you apply it to a Metatrader 4 (MT4) account, you will only have to wait for the wonder of 98% winning trades to happen. If that seems too good to be true, that’s probably because it is not.
But let’s examine the block-buster asserts further. According to Larsen, a reverse strategy allows fast compensation for losses incurred. Say the robot purchases EURUSD and suffers a loss. As a result, it will instantly open a reverse trade (market ) — a strategy known as stop-and-reverse. In fact, that’s something quite simple to implement in a software — even by novices — so there goes the”genius” of both programmers (Ronald and Antony) responsible for the bot.
The fascinating part about this bot is its approach to improve trade contract sizes. When the EA reverses a trade, it raises steeply the trade contract size — from 5 to 9 times.
Does this remind you of something? To me, this resembles a Martingale strategy, which is a gaming method, where you start with a specific bet size, then double it every time you lose and keep doing so until you win, when you turn back to the first bet size. What’s dangerous about this strategy is that it can guarantee specific gains only to gamblers with infinite wealth and there’s absolutely not any limit on the maximum bet you can make. However, if your wealth is limited, which generally is the case with forex trading, or there’s a maximum amount you can exchange (again — the situation with trading), then you might end up buried under the weight of constantly rising bets without a genuine possibility to return your losses. That is to say, if you lose more than once, your accounts will most likely fail.
Backtests: Oh, Sweet, Sweet, Martingale!
Let us explore the backtests to determine how the peculiar strategy of GPS Forex Robot works.
At a first glance, the picture is rosy, as this incredible robot makes drives an initial deposit of $10,000 to a net profit of $100,952. The relative drawdown is at 20%, which is an acceptable risk level. Adding to the sequence of positive news, profit trades (89%) outnumber the losing trades (11%). Pay attention, however, that the average profit trade ($219) lags behind the average loss trade ($824)! That’s troublesome because a series of losses can get you into a really deep trouble.
The history of transactions is really enlightening, as you may see the odd trading strategy of the robot in action. For example, 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 market trade but with commerce contract size of 6.8. This time it’s a winner — there’s a gain of $904, but such lucrative trades can’t be guaranteed.
Forward tests: Cradle of Loss
A true account on http://all4webs.com/mayoguyuzi/doesgpsforexrobot.htm?52659=48875, to which the GPS Forex Robot is applied, provides us with further insight concerning this EA. The transaction is with EURUSD and began on May 21, 2012. Since its activation, the account has registered a profit of 153%, which, given the first deposit of $100,000, represents a whopping sum.
The account hasn’t registered a single month of losses since its launch, even though the growth rate is gradually declining.
A worrying sign is that average pips per trade are in 4.6, which hints at 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 accounts with ThinkForex.
The risk is reduced, but since drawdown reaches a good level of 10%, the same as that of FIB and much lower (which is good thing) than the 42% recorded by FGB’s account.
The curious part is from the history of transactions as once again we experience the stop-and-reverse strategy and the particular version of the Martingale method. The robot applies both approaches when there are particularly heavy losses. For example, after 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 lots to 75 lots. In case the robot had suffered another loss like the previous one, but with the increased commerce contract size, the whole loss would have shrunk to $71,088. Imagine what could have happened after a series of 6 or 7 losses, or even 20!
If you are acquainted with Isaac Asimov’s work, you should 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 may be not harming the dealers, but it is harming their accounts. It is similar to the Rosemary’s baby sleeping in the cradle of reduction. You just don’t know when the baby is going to awaken and unleash hell.
Don’t Care about Bad Reputation
The funniest thing is that Mark Larsen seems not to care at all about the strategy used by the GPS Forex Robot. In actuality, he’s the single person to have rated this EA with five stars, in his own review of the program. Way to go, Larsen! Even if that’s the best way to hell.
Know your keywords
Expert advisor (EA) — An algorithmic trading system for the MetaTrader platform; a trading robot. EA’s can be downloaded free of charge or for a fee, or can be programmed in the MQL programming language.
Backtesting — Testing a trading plan on past time periods through a simulation.
Drawdown – A dealer’s biggest loss for a certain period of time, expressed either in pips or as a
Percentage of the dealer’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%).
A standard lot consists of 100,000
If you’re buying 1 lot EURUSD at 1.3000 for example, you’re buying 100,000 Euro for 130,000 US Dollars.
Pip – The fourth digit after the decimal indication of a price quote. For instance: if the EUR/USD moves from
1.3350 to 1.3351, that is 1 pip. Pips are used to quantify price movement, profit and slippage.