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The Best Forex Robot – Black Box TradingOccasionally, somebody writes and asks me if I would recommend any commercial trading systems or Forex robots. A Forex 'robot' is simply an automatic trading system, that is, a trading system that a computer trades automatically for the system's user. Anyway, the short answer to that question I'm afraid, is no. There are no commercial trading systems or Forex Robots that I could recommend. However, I would actually go further and say that I strongly recommend that one does not buy any black box trading system. In fact, I would go even further still and caution against trading any black box trading system, regardless if it is free or not. The problem with not knowing exactly how any robot or trading system works is that you have no way of knowing if the system's methodology is sound or not. Even if you can be sure that the system's historical results are genuine, that knowledge alone is not enough to be sure that the system is worth trading. For example, the Forex robot or black box trading system could be curve fitted. It is perfectly possible to back test an essentially worthless trading system and curve fit it to produce seemingly great results on historical data. For example, say a black box trading system or Forex robot used moving average crossovers and the system was essentially worthless, if the system was tested on historical data with every possible combination of moving average at least one combination would most likely produce great results on historical data. But the system, even when using the parameters that produced the great results on historical data, would still be worthless as the great results produced on the back-testing would have come about by chance. Curve fitting essentially improves the results on historical data by assuming that 'luck' from certain combinations of parameters in the past can be relied upon to produce similar results in the future when it almost certainly can't. It is the same sort of logic as assuming that since the number 2 appeared in the last 5 lottery draws it will appear in the next 5. The way to overcome the effects of curve fitting is to test your system with different parameters. If you can vary the system's parameters by as much as say, 15% or 20% and still get similar results then the system most likely has an edge, or at least it had an edge in the past, and you can therefore be reasonably sure that the results haven't come about through the effects of curve fitting. If the trading system/robot however is white box system where the rules are divulged so you can test them for yourself then the system may well be worth trading. However I'd recommend that you don't trade it as it is. Systems tend to be right for the people who develop them; following another's system is much harder than trading your own. If you are trading another persons system it is better if you change it to suit yourself and thoroughly test your changes. If you are interested in doing this, there are some incomplete trading systems in this site's technical trading systems library for the reader to adapt and make their own. |
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