I attended the The Singapore Automated Forex Trading Meetup Group started by ck last week. Prior to the session, I never thought expert advisors (EAs) could perform so well! A stereotype that I held from don’t know when…

What did I learn from the session?

90% of the expert advisors out there are scams

But what about the remaining 10%? Can they really make money? Check out the champion of the 2007 Automated Trading Championships. He made a WHOPPING US$130 000 in under 3 months from US$10,000! WAIT! ck shared with us that he had the privilege of reviewing one of the winner’s EA after the competition and, you know what, it lost money. Well, perhaps the competitive EAs were tuned to perform at their best during competition period. So… are there EAs that can really make money?

Another perspective of why EAs rock!

A Mr KT Wong who is an retired institutional trader made a guest appearance to share about his view on EAs. The salient points he raised almost made me fall off my chair!

According to Mr Wong, we should use EAs because:

• EAs can trade emotionlessly. They are software programs anyway. Humans are emotional animals. And this is much dreaded in trading.
• EAs prevent us from being “jobbed” by the professional traders out there. The professionals are looking at our stop loss orders and they won’t hesitate to take us out when the time is ripe. Using EAs, we don’t have to set any stop loss/limit orders because this will be taken care of by the EA program at runtime.
• EAs help us to be truely efficient and take advantage of all possible trade opportunities. EAs run 24 x 7 without complaints!
• This last point hit me really hard. Most, if not all, technical analysis techniques have around 50% success rate. As with all successful traders, Mr Wong also advocates money management as the key success factor to trading. By money management, he was not merely referring to any 2% or 6% rules. He was talking about things like hedging, averaging etc. Things which I was clueless about (but I will be finding out more from him tomorrow).

And he has developed such an EA! Characteristics of such an EA is that it will have an equity graph that is generally rising with blimps that occurs in periodic cycles. It is at those blimps that all winning positions as well as losing positions are all closed out.

I left the meetup with this phrase ringing in my ear:

“When adopting good money management practices, there is no need for stop losses”

Well, I cannot appreciate the above phrase at the moment. But will try to unravel the secrets within the next few months.

In my next post, I will be sharing the EAs that adopts good money management practices as well as EAs that is worth taking a look, as shared by ck.

If you find this post or this blog is helpful to you in any way...do consider buying jmot a kopi (aka coffee)!