The Market and the Expert Advisors

As I mentioned in a previous post, expert advisors, (entities that deal with trades automatically) may never be tested in a satisfactory way for future performance. The reason why, as I said, was because there is no way an expert advisor may be tested to account for all future market conditions. This is mainly because the market is too dynamic, being a reflection of global economical aspects which as we know, change dramatically as time goes by.

As an example, I have prepared a monthly EUR/USD graph, showing the relationship between these currencies for the past years. As you can see there are a lot of market conditions. For example, the market conditions between 1998 and the year 2000 are mainly bearish, while the conditions between 2000 and 2002 are those of a trending market.

Now, here comes the pretty part. If you had forward tested an expert advisor for a year between 2000 and 2001 and that expert advisor did very well in ranging markets then your results would have appeared to be very positive for that time. Your results may have even remained very positive after that (for a small while!).

Then, as market condition begin to change, your ea would have started to show negative results, probably killing your account somewhere along the next 3 years in which the market was amazingly trending.

It is clear to anyone now that an ea has to go through an amazing amount of market conditions. An ea may perform well in forward testing or backtesting. This DOES NOT imply that the ea will perform well in the future, it just means that it did perform well somewhere in the past and it may perform well again in that exact same type of market condition.

So the best way in which you can have positive results is by having several expert advisors that work on several types of market conditions. This assures that you will have small sustainable revenues in the long run. One to five percent a month. Anything else promised by anyone with a single expert advisor in the forex market is a pure lie.

I put it like this. If an expert advisor made 10% a month, you could be starting today with 500 dollars and having 5 million in less than 6 years due to compounding. Come on, market conditions would change far before you could get such a sustained revenue. The expert advisor would die in the process.

If you want long term sustainable profits in forex, aim at one to 3 percent a month with several expert advisors to compete in different market conditions. If you want to get rich with forex quickly, please go to Vegas. At least the drinks are free :)
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