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Monday, August 15, 2011

Forex Breakout System Review

I'm going to take a look at some of the (many) automated strategies currently available for MetaTrader on the market. Seperating the wheat from the chaff is a time consuming process and I'll start with some of the cheaper products out there.

First on my list is a Forex Breakout System. The system has the usual corny splash page promotion, but is it any good?

The strategy retails for $125 and offers the core Expert Advisor strategy in addition to Candlestick and Pivot indicators to add to your charts, but the real interest is the strategy. Documentation is provided to help you set up and get started.

Expert Properties Setup

For the purpose of the test I will use a $10,000 starting account trading 0.1 Lots both Long & Short. In Expert Advisor Options, the boxes to 'Allow DLL Imports' and 'External Experts Imports' were checked and if Live trading was to be supported these should be checked too.

There was no Optimization employed.

This particular strategy trades in three different time zones so in the Expert Properties / Inputs it was necessary to set the Lot size for each time block (the image shows the Asia_FixedLots configuration); both 'Value' and 'Start' were set to 0.1 for Asia,  London and New York.

Other Expert Properties Inputs were left unchanged and unticked. Further adjustments may improve the performance.

Comparative Test Period

Three 12-month periods of 15-minute data on the EURUSD were initially selected randomly from a 10 year period starting January 1st 2000. These dates will form the basis for comparative tests across different MT systems. The periods tested were

March 31st 2000 to March 31st 2001
June 29th 2003 to June 29th 2004
May 17th 2001 to May 17th 2002

Comparative Results

Despite a very high win percentage the strategy failed to perform at deployed settings. The strategy frequently took small profits and in many cases broke even, but individual losses were large.

Comparative Graphs

The FBS strategy nickle-and-dimed the test account lower.

Random Test Period

A second set of tests were conducted a fresh set of data. I had hoped to test on a different currency pairing but the Model Quaility of results wasn't high enough to qualify. The start dates were randomly selected from the period of January 1st 2000 to January 1st 2009 and covered 12 months. The test was conducted on 15-minute data. The test periods were:

April 1st 2009 to April 1st 2010
November 12th 2000 to November 12 2001
March 25th 2002 to March 25th 2003

Random Test Results

Only one of the three random test periods didn't show a loss, although if slippage was a factor it would likely have registered as a loss. The remainining two random sample dates were close to the Comparative test period, so the results were similar (and therefore counted as losses).

Random Test Graphs

The April 2009 - 2010 test period did manage to work a small profit before giving it all back at the end.


On their website they give two examples of their system. One which shows a win percentage of 74% in the EURUSD trading in March 2010. The other with an impressive 96% winners trading the GBPUSD in December 2007. During March 2010 the EURUSD was effectively range bound, while in December 2007 GBPUSD was in a strong downtrend. So while they may have cherry picked their promotion sample period, returned results weren't necessarily attributed to a given trend (or lack thereof). 

The win percentage expectation between their sample set and the results presented here are comparable, as was the likely loss per trade - which was quite heavy in their sample period relative to their profits. But where they showed strong profits per trade, analysis here showed little of that, despite all the winning trades. If there is an issue with the strategy 'out of the box' then better documentation may help improve this return.

At the core there may be a useful strategy to deploy, but users adopting it will need to get under the hood to work the profit side of the returns.

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