Saturday, January 29, 2011

My Personal Experience with Trading Robots


“Failures are the greatest teachers of any successful trader. All professional fields are replete with successful experiences as well as failures.” – Suri Duddella

“Investing is fun and trading more fun still. This is why even when people lose money they keep coming back for more.” – Clem Chambers


The human brain is the most wonderful object in the universe. If a young person has more suits than an elder, he cannot have as many rags as the elder. It makes more sense to derive conclusions from a wealth of experience rather than naïve fantasy. There are many conflicting opinions when it comes to ideas that work in trading, but it’s the opinions that lead to long-term survival that are valid.

In my past articles titled “Manual Trading versus Automated Trading – Parts 1&2,” I tried to explain the pros and cons of trading robots against manual trading. I’m not going to repeat the contents of those articles here. No matter what you say, people will do what they’ll do. Someone may come to you for advice and still do what they’ll do. Some people would continue to do the same thing again and again despite one harsh experience after the other.

When I was a novice trader, I was helplessly captivated by the most common statement made by sly marketers: “This is the world number one trading product. YOU NEED NO PRACTICAL TRADING EXPERIENCE TO USE THIS SYSTEM/EA SUCCESSFULLY. GUARANTEED! (This statement is still very much in use today).” I wasn’t aware that what they were saying was tantamount to: “You need no practical experience to become a qualified doctor. Guaranteed!” I was in possession of nice trading accounts, but without adequate trading knowledge. I was initially afraid of high risk, but I soon ignored my fear, thinking that I would survive because those robots seemed to survive irrespective of high risk (as shown by their marketers). I was always fascinated by trading results of those robots, whether on web pages or account histories of those marketing them. Within the next few years, I spent a fortune buying one EA after the other, sometimes combining 2 or 3 EAs on one account with the hope of maximizing profits.

I can tell you that I used most of the aggressively marketed trading robots in the world. Either I initially made good profits for a while before experiencing extremely unbearable drawdowns on my trading accounts, or I experienced drawdowns straight away. Brokers were even making the matters worse, whereas the EAs manufacturers continued making new versions to replace old versions, raking in lots of money from huge sales – all without any long-term statistical improvements. I kept on buying new robots; the best available. I was using them on Remote Desktop Connection, writing down and implementing their configurations and optimizing settings, looking for better robots always, thinking that things would improve soon. I kept on being bombarded with newly manufactured robots almost every week. At last, I had to stop the madness when I got on the brink of bankruptcy. My career was seriously at stake, my pride was hurt and things became very difficult. In fact, I don’t want to go into details about what I later went through. It was a nasty experience. I couldn’t imagine what would’ve happened to me if I still depended on EAs. This was a long time ago.

Nevertheless I’m happy that I survived to tell the tale. I met an unforgettable turnaround in my trading career when I began to uncover some established trading facts and brought myself into harmony with them. Things have improved remarkably since then, especially with the permanently successful manual trading strategies in my possession. Yes the future is very much brighter!

Mr. L. Olanrewaju, a successful trader I featured in one of my past articles, experimented so much with a host of EAs for many years; only for him to conclude that: “Once you decide to automate your trading strategy, then you’d need to struggle to overcome many hurdles. I know when I must ignore a trading setup if other cogent factors don’t support it. An EA cannot do this – it can’t use discretion.”

There’s presently one EA that appears to be the best in the world. Many novice traders are blown off by the past performance, which is almost 500% returns in 5 months. The sense of greed of many impatient traders has already been appealed to. But a diligent scrutiny has revealed these pitfalls in the EA: a). The customer support service of both the marketer and the manufacturer of this EA is very poor. They don’t reply to email. b). The EA doesn’t work with any broker except one unregulated broker they use in a Scandinavian country. Plus they seem to have no plans to get regulated. It’s no longer news that any unregulated broker can manipulate anything to suit any purposes [even with possible collaboration with the manufacturer]. c). An independent simulation runs shows that the EA would’ve have suffered crashes several times. One person experimenting with the simulation is perplexed by good results on the manufacturer’s account and bad results on his own account. d). There are numerous complaints against the robot. e). The expectancy of each trade is unthinkably negative, i.e., very bad risk-to-reward ratio. e). The risk on each trade is roughly 30%. This is just one example of those hyped robots.

Many robots have blown many accounts, and as a result, many people give up trading prematurely because they initially thought that mastering the markets is easier than it actually is. Many people spend years polishing their trading skills. Hordes of traders resort to trading robots because they’re in a hurry to make huge profits on the markets and/or because they see that trading is hard. In trading, the earlier isn’t always the better. Robots can provide very quick profits, but if you’re not diligent about controlling your risk (small size and placing a stop). It can go against you in a hurry and damage your equity. One content contributor [who’s an ardent EAs enthusiast] at deduces: “One very important point I would like to make....EAs do not work always. Some of them work in trending and some of them work in chop...also ALL of them eventually stop making profit. So it is my job to try and discover WHEN to stop using them. I have not found an adaptive EA that is set and forget….I have learned to lower my expectations and take a slower approach to trading profits, I am much happier that way. I would rather make 20 or 30% a year with no more than 15% DD vs. 100% a year with a 50% DD. That is just me and many traders do not agree with me.

Who’s Your Role Model?

Are you a real market speculator? Could you survive on the market without EAs? As far as I’m concerned, anyone who can’t make long-term profit without robots (whether their trading style is scalping or intraday trading or swing trading or position trading or investing) isn’t fit to be called a professional trader. Who do you have as your trading role model, someone who solely depends on EAs, or someone who can consistently pull out profit from the markets with her/his trading rules? My role models don’t commit their financial fate to robots. I know successful full-time scalpers who wouldn’t let any automated systems do their job for them. They know that even scalping sometimes needs discretion. I’ve decided never to use EAs again in my trading. I take my trading decisions and manage my trades according to my rules. Many traders were consistently surviving on the market before the advent of robots. Therefore, contrary to what some people believe, it’s possible to be a successful trader without the use of robots.

Most top traders have found trading strategies that fit them and would never let a robot trade for them. Dr. Van. K. Tharp, a world-renowned trading coach, once said that free advice doesn’t mean anything for most people because people seldom appreciate what they get free of charge. Advice from experienced traders is always good; they offer it free of charge, and they got your best intention in mind. What contrast to the advice of deceptive marketers (using extremely high trading volume to attract unwary traders) who are wolves in sheep’s clothing! EAs have come to stay. Rookie traders would continue to be bombarded with robots from marketers, most of whom have little or no credibility. Many new robots would be manufactured in future and many traders would continue to learn bitter lessons.

NB: I’m completely in support of the use of automation to deliver trading signals to managed/clients’ accounts. As new positions are opened, managed and later exited; they can be executed automatically on subscribers/investor’s accounts. This type of service is highly beneficial – an excellent service which is totally different from committing all primary trading decisions to EAs.

I conclude this article with a quote from R. J. Hixson:

The instrument you trade has less to do with trading success than working on your self, treating your trading as a business, understanding position sizing strategies and the other main factors…”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Senior Analyst

FX Instructor, LLC


Yahoo! Messenger ID: saazalmu

Get my Forex trading signals at:

And my past articles are also available at:

NB: There is risk of loss in trading, but it is possible to be a successful trader.

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