Today another new automated trading system called Forex Photon has seen the light. Within this post I will look at this experts website and I will review its evidence. At first I will analyze the reliability and quality of the evidence provided and I will then see if this evidence is able to backup the authors claims. After doing this I will then do a careful analysis of the trading tactics according to the evidence and I will tell you my opinion about the experts potential of achieving long term profitability and whether or not this trading system is worth buying and testing. Is the Forex Photon trading system reliable ? Does it have a good like hood of being long term profitable ? I will try to answer these and more questions during the following few paragraphs.
The home page of the forex photon website makes some pretty strong claims about this trading systems profitability. The creators of the system claims the Forex Photon expert advisor to have very low draw down, profitability under any market condition and a very high winning rate, things which are easy to claim but actually very difficult to proof in the long term. They also state that they do "no marketing and no B.S" something which they do seem to try to carry out through the whole page.
When we look at the actual evidence of profitability available we see some very interesting things. We have 10 year backtesting results divided by years for several currency pairs, something which is interesting and actually worth congratulating the Forex Photon team for as they seem to be willing to do everything they can to prove their systems profitability. Nonetheless, this evidence show us some very interesting facts about the system like a risk to reward ratio close to 5:1. It is very interesting to say that systems which have unfavorable risk to reward ratios tend to be sensitive to a decrease in the winning percentage as they need a very high winning ratio to remain break-even or only slightly profitable. The fact that the average closing profit of the system is in the order of 5-6 pips points out that one minute interpolation errors are bound to be very important and the fact that the backtests are done on a 5 minute timeframe does not help either since the small number of reference points makes the highest real achievable modeling quality on this time frame only 50%.
In my experience systems like this usually have a great overestimation of the number of profitable trades and real trading usually shows periods of consecutive or nearly-consecutive loses which end up taking all the systems profitability. Also the fact that the TP is actually so small will make execution variables such as re-quotes, slippage and spread widening vital to evaluate true profitability.
However, the people at Forex Photon seem to know this and they also put up a myfxbook account showing us the "live" performance of Forex Photon. However, it is very worth noting that the live account shown does NOT have its investor access verified, pointing that the statement shown could be manipulated. I urge the people at Forex Photon to get their investor access verified to eliminate this possible doubt. Sadly, since multiple currencies are being used, a back/live testing consistency analysis is not directly possible from the "live" trading data shown. The winning rate on this "live" account seem to be above 83% but the testing period is just too small and simply not statistically relevant in order to think that the system could be long term profitable. A test of about 6 months would be needed in order to compare the trading system with backtesting results and see if the errors within the backtest account for all the experts profitability or if the expert can still remain profitable within live execution.
In the end - eventhough the intentions of the people at Forex Photon seem to be good - the trading system simply cannot prove yet that it has a high like hood of being long term profitable. The backtesting statements of this system, due to the very low timeframe, low TP and high risk to reward ratio are highly unreliable and only tests on live accounts over LONG periods of time can show if this system has or does not have true pontential. Since a high like hood of long term profitability cannot be proven yet, I consider this system not worth buying or testing, since simply there is no reason to believe that very large risks are not being taken as there could - and probably is - a large underestimation of loses in the long term on the backtests. If 6 month - 1 year investor access verified live tests which are directly comparable with backtests are provided then this evaluation could be done and we could accurately determine the actual extent of these problems.
If you would like to learn more about the design of long term profitable systems and how you too can make your own systems that can adapt to changes in market conditions and have a high like hood of withstanding the test of time please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
The home page of the forex photon website makes some pretty strong claims about this trading systems profitability. The creators of the system claims the Forex Photon expert advisor to have very low draw down, profitability under any market condition and a very high winning rate, things which are easy to claim but actually very difficult to proof in the long term. They also state that they do "no marketing and no B.S" something which they do seem to try to carry out through the whole page.
When we look at the actual evidence of profitability available we see some very interesting things. We have 10 year backtesting results divided by years for several currency pairs, something which is interesting and actually worth congratulating the Forex Photon team for as they seem to be willing to do everything they can to prove their systems profitability. Nonetheless, this evidence show us some very interesting facts about the system like a risk to reward ratio close to 5:1. It is very interesting to say that systems which have unfavorable risk to reward ratios tend to be sensitive to a decrease in the winning percentage as they need a very high winning ratio to remain break-even or only slightly profitable. The fact that the average closing profit of the system is in the order of 5-6 pips points out that one minute interpolation errors are bound to be very important and the fact that the backtests are done on a 5 minute timeframe does not help either since the small number of reference points makes the highest real achievable modeling quality on this time frame only 50%.
In my experience systems like this usually have a great overestimation of the number of profitable trades and real trading usually shows periods of consecutive or nearly-consecutive loses which end up taking all the systems profitability. Also the fact that the TP is actually so small will make execution variables such as re-quotes, slippage and spread widening vital to evaluate true profitability.
However, the people at Forex Photon seem to know this and they also put up a myfxbook account showing us the "live" performance of Forex Photon. However, it is very worth noting that the live account shown does NOT have its investor access verified, pointing that the statement shown could be manipulated. I urge the people at Forex Photon to get their investor access verified to eliminate this possible doubt. Sadly, since multiple currencies are being used, a back/live testing consistency analysis is not directly possible from the "live" trading data shown. The winning rate on this "live" account seem to be above 83% but the testing period is just too small and simply not statistically relevant in order to think that the system could be long term profitable. A test of about 6 months would be needed in order to compare the trading system with backtesting results and see if the errors within the backtest account for all the experts profitability or if the expert can still remain profitable within live execution.
In the end - eventhough the intentions of the people at Forex Photon seem to be good - the trading system simply cannot prove yet that it has a high like hood of being long term profitable. The backtesting statements of this system, due to the very low timeframe, low TP and high risk to reward ratio are highly unreliable and only tests on live accounts over LONG periods of time can show if this system has or does not have true pontential. Since a high like hood of long term profitability cannot be proven yet, I consider this system not worth buying or testing, since simply there is no reason to believe that very large risks are not being taken as there could - and probably is - a large underestimation of loses in the long term on the backtests. If 6 month - 1 year investor access verified live tests which are directly comparable with backtests are provided then this evaluation could be done and we could accurately determine the actual extent of these problems.
If you would like to learn more about the design of long term profitable systems and how you too can make your own systems that can adapt to changes in market conditions and have a high like hood of withstanding the test of time please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
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