Another week, another forex system.
Forex ambush – a risky system to be avoided
I thought I might share details of a system that someone emailed me about yesterday.
The system in question is Forex Ambush (http://www.forexambush.com) – yet another forex system vendor who took the imaginative step of adding a ‘power’ word after ‘forex’ to name their product.
Forex ambush, forex assassin, forex assault. Think of a good power word and there’s probably already a forex system with that name.
The system is marketed with a load of blurb about the financial crisis: layoffs, debt, depression and why you need forex ambush which WILL make you money. We’re told it is 100% accurate with returns in excess of 20,000% annually.
Firstly, nothing is 100% accurate, at least not in the long run. That claim got my hackles up.
It took a quick scan of the results to reveal that Forex ambush was a very dangerous proposition.
All the wins are 10-20 pips which makes this a scalping system, which is fine apart from the fact that the system might be risking 300 pips to make just 10!
On January 2nd of this year, the system sold EURCAD at 1.6989 and closed at 1.6977 around three hours later. I’ve checked my charts and at one stage that trade was 110 pips against.
So you are risking 110 to win 12. That’s not the kind of risk reward I like to see.
This one is worse: Sept 12th 2008 – Sold EUR/ USD at 1.4170, closed at 1.4150. 20 pip profit. However, it went 313 pips against at one stage, that’s risking 313 to win 20. Madness!
Before the financial crisis broke, I was reading Nassim Taleb’s books on black swans and how we are all fooled by chanced. One of the explanations for the sub prime crisis is risk taking like this.
Certain investment bankers were buying/selling bonds consisting of bundled up sub prime/prime mortgages. The returns on this were tiny in comparison to the risks taken on. According to Taleb, it was like picking up pennies in front of a steamroller. The reason they were willing to take such a short-term view was because their bonuses were based on short-term performance.
We all know what happened next… they (and we) got steam rollered.
So while Forex Ambush might continue with its ‘100%’ record for a few more weeks/months, the chances are that one day soon that trade which reversed on them won’t come back and you’ll be left with a loss of 1000 pips or more trying to win just 10.
There’s nothing wrong with risking more than you stand to lose provided you have a plan in place that accounts for this – i.e. a high strike rate. You can make money risking £100 to win £10 if you have a 95% strike rate. However, it is very dangerous to believe that just because a system hasn’t lost, it won’t, especially when there doesn’t seem to be a cut off point for the stop loss level!
What Really Profits
The latest edition of What Really profits is with the publishers. In it I’ve a full review of Phil Newton’s www.Trading-strategies.info service. I also review an excellent program called ShareMaestro. There’s reviews of the news profiteer ebook and FX pro. This month I’ve also included a couple of strategies; one on how to trade break outs in forex trading and a simple two step system for trading US stocks.
You can sign up here if you haven’t done so already: http://www.whatreallyprofits.com/
System round up
FAP turbo – http://www.fapturbo.com/
Poor week for FAP turbo, but it still hasn’t blown up yet. It’s amazing how different the results are from broker to broker. I think it all comes down to the size of the spread on offer. You can check out some reliable results via my contact Steve Hoven’s website here: http://www.fapturboreview.net
Pips on demand
Bill Chapman’s Pips On Demand has been floating around for a while and recently a few of my testers took a look at it. It seemed (on the face of it) to be fairly mechanical, but on further examination there were more nuances and refinements which weren’t included in the manual. Testing so far has been inconclusive at best, though the testers have reported that the support and webinars have been quite good. We’ve not given up on this one just yet, but it does appear that there’s a big discretionary element to this which might be making all the difference for the people behind it at the moment. Click here for more info: http://www.rhuddlandirect.co.uk. I’ll update again soon with more progress.
Want to help me test systems?
My system testers are doing a grand job for me, but I’ve currently got more systems than I can sensibly divide between my volunteers. If you are interested get in touch. I’m looking for people who definitely have the time to track the system and report back to me. I’d rather have a small dedicated team than lots of people who don’t report back. I’ve currently got a couple of systems for trading the evening markets and another for trading throughout the day that need some extra testers.
Limited action with my intraday forex trades, but there was a great move on GBP/USD yesterday. Funnily enough, that turned out to hedge and close my short on the British pound, which was a nice trade picked up from The Wizard from the 1.45 region. The Wizard has a slow start to the year, but the trades seem to be kicking in now.
I’ve been out of the market with my S&P 500 trades. Too much chop and I can’t find a decent edge. There’s some overhead resistance in the 850 area, I’ll be watching closely to see what happens there. No firm view on whether to short or go long, but might make a call based on what mr market gets up to around those levels (if we get there again).
This week’s hot trading buttons
The coming week’s big ticket item is the next FOMC interest rate decision. With rates currently at 0.25%, there is little room for manoeuvre. Speculators will be following the announcement closely to see if the Federal Reserve will follow Japan’s lead from the 1980’s, and cut rates to zero. Almost as important as the rate decision, will be any accompanying announcements on other measures the central bank is taking to get credit markets functioning again.
“Human beings are subject to wild swings in their levels of fear, risk tolerance and greed. That won’t change. I base my whole approach on buying when others are fearful and selling when others are greedy. The reason Shakespeare is so relevant still today is that his plays were all about human nature, and human nature never changes.” – Mark Sellers