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The FOREX Experiment: “Do Forex Trading Robots Work?”

Post a Comment April 18, 2009 – 5:06 am |   | Permalink |  Print This Post |

Our search for a Forex Robot Software to participate in The Inflationist Forex Robot Software Experiment is over. For new readers, we questioned if Trading Robot Softwares work in our post four weeks ago: “Forex Trading Robot Softwares: Do they Work?” Our feeling is they dont. It is unlikely for anyone to share a software that works considering this is a zero sum game and any profitable Robot marketed successfully would ultimately affect the balance between winners and losers. As with evolution, any subpopulation with a survival advantage would thrive and subsequently increase in numbers over time - whilst the population without such advantage would gradually decline (at least in ratio). Similarly, a subpopulation of traders with trading advantage would also thrive and increase in numbers (ie trade size or number of traders using the system) and eventually affect the dynamics and ratios of winners and losers- thus reducing the effectiveness of the system in time.

With a healthy sceptical mindset, we embarked on our quest to seek the Holy Grail of Trading - very happy to be proven wrong. We offered anonymity to all participating Forex Software developers to test their software on TheInflationist- allowing us to filter out systems that do not work without affecting their reputation. Our first volunteer is so confident of their system that they are putting their reputation on the line trading without anonymity (against our advice). The HOG2 Indicator is a customised EURUSD-USDCHF Hedge Indicator jointly developed in 2008 by a trader and mathematician. HOG2 is technically not a Robot since it does not automate trades. Instead, it is a Forex Indicator which tells users when it is safe to take a trade (or when not to take a trade). For the last month, we have engaged the developers and have finally agreed to a trial design which is fair and transparent. Our study design aims to apply a scientific approach to Forex Investing. As far as we know, this is the only Forex Experiment that is attempting to forward test a Forex Software under these objective conditions.

About The HOG2 Indicator

Trading the EURUSD-USDCHF Hedge has never been easier. This custom indicator is completely new and unique to the Forex world. Some have called it ‘the Forex Traders Best Friend”. We have combined formulas for inter market analysis with a unique compound indicator and the result is a Forex Traders dream come true…

The H.O.G. 2 Custom EUR-USD-USDCHF Indicator (H.O.G. 2 for short) runs inside the Metatrader 4 (MT4) Forex trading platform. The H.O.G. 2 is totally unique.  It is composed of four indicators in three indicator windows. With The H.O.G. 2, you get an exact fix on your trade simply by comparing the three indicator windows.

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The Top Indicator Window shows a line graph of the total value of the hedge pairs as compared to a 60 period exponential moving average (MA) and a set of Bollinger bands set at 1.0 and 2.5 standard deviations.  This arrangement shows you, at a glance, when the Hedge (as a whole) is over-sold or over-bought.  An up trending MA suggests to go long and a down trending MA to go short.

The Middle Indicator Window shows the ‘Bias Value’ trend line. This ‘Bias Value’ line indicates a suggested value for the hedge pairs based on the fundamental factors outside of the Forex market that have a direct bearing on the value of the EURUSD-USDCHF Hedge. This ‘Bias Value’ trend line shows you when the Hedge pairs are overvalued or undervalued as compared to a number of external market parameters.

The Bottom Indicator Window is where everything comes together. It contains a custom Histogram that is an indicator of an indicator.  It works off of the total value trend line from the upper indicator window and shows the ‘buy’ or ‘sell’ strength of the trade at any point in time. A green up bar indicates a long trade and a red down bar a short trade.  The H.O.G. 2 shows you when to trade long and when to trade short.

This ‘Bias Value’ trend line shows you the “push/pull” on the hedge trade. The greater the difference the ‘Bias Value’ of the hedge is from the actual value of the hedge, the greater the chances these trend lines will converge. Much like pulling on the ends of a rubber band - the harder you pull, the greater the resistance and tension - the more the rubber band wants to snap back to its original length.

You will be amazed by how simple and straight forward your trading will become because you’ll be able to get a solid fix on your trade just by watching the Histogram, Total Value trend line, and ‘Bias value’ trend line - before you even place your trade!

THE FOREX ROBOT EXPERIMENT: DOES IT WORK?

Aim

• To investigate if Forex Robots Work.

Software

• HOG2 Euro/USD and USD/CHF Indicator

Trader

• Perrie. Perrie is a subscriber of the HOG2 from Australia who has agreed to pilot the HOG2 Indicator for the purpose of the Trial. Perrie has been contacted by TheInflationist independently and we are satisfied that he is independent of the HOG2 team (it was quite evident by his initial reluctance to participate). Click here to read Perrie’s full profile.

Method

• Trial period: 30-60 days (depending on number of trades taken)
• Trades will be disclosed as soon as they are closed in a prospective manner (not ideal in our opinion - we preferred open trades where manipulation is not possible. Open trading also allows readers to participate and potentially profit from the trial. The developers have insisted on closed trades to encourage readers to subscribe. To verify the trades, Perrie will notify us on trades as and when they are taken).
• Trading rationale and live interpretation of indicators will be provided by Perrie prospectively.
• Perrie intends to take actual trades posted and will not be responsible for potential losses of those who trade based on his posts. All posts made by Perrie are for the purpose of the Experiment and does not constitute financial advice. For full terms and conditions of TheInflationist, please click here.

Fellow traders, stay tuned for the start of TheInflationist Forex Robot Trading Experiment next week - the first Forex Trial on the internet! If you are a developer of any Trading System and wish to trial your system on TheInflationst, please contact us. We would like to thank and welcome Perrie and the developers of the HOG2 for participating in TheInflationist Forex Software Experiment.

If you are convinced with the results of the HOG2 Indicator at any stage of the experiment and wish to start learning how to trade using the HOG2 Indicator, simply Sign up For the HOG2 to Start Learning How to Trade Profitably. We have also negotiated for readers to a Special 30 Day Trial For $1
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How you can Help Us:

• If you are a subscriber of a Forex Robot Trading Software, please sign up (its free) and post your trades live. No need to blog about your reasoning if time is an issue. Just 5-10 words detailing your exact trades.
• If you developed a Forex Robot Trading Software and are happy to test it, please register to The Inflationist Challenge.
• If you developed a Forex Robot Trading Software, are happy to test it but have no time, and happy to give us free access for the purpose of testing it live: please email us at theinflationist (at) gmail (dot) com.
• If you do not fall into any of the above category but wish to see this experiment go ahead like us, please spread the word. Email this link to as many people as possible, spread the word on finance blogs or newspaper editors, and contact any Forex and Stock Experts you know (or are paying) to invite them to this Challenge.