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Forex Combo EA - Expert Advisor Review

It's an unfortunate fact of life that I don't have the necessary time to fully review every EA that I have in forward test, and I therefore have to be selective about which Expert Advisors I do choose to analyse.

Forex Combo EAThat can be loosely translated to read that I'll probably only review something if it's either profitable or if I like it a lot.

By way of an example, I've had the Forex Combo EA in forward test for over three months now, but it's only recently that it's moved into profitability and I feel it's become worthy of a full review.

The Forex Combo system gets its name because it is a combination of three separate EAs which have been merged into one. In fact, that's not entirely true, because users get one EA which is designed to work on cable (GBPUSD currency symbol) and a second EA which works on fiber (EURUSD symbol). The two EAs are essentially the same, but their parameters use different optimum values for each of the two symbols.
Each of the three strategies acts independently of the other two strategies, and users have the option of running either all or any of the strategies they wish. None of the strategies are particularly prolific traders in their own right although, with all strategies combined, the EA should trade on average once a day on each of its two currency symbols, and I guess that the strategies have been merged into one as a way of providing better value for money from the product.


About the EA

Forex Combo runs on two currency symbols as mentioned above on the 5-minute chart timeframe. The first thing to be said about the Forex Combo concept is that using multiple strategies within the same EA is invariably going to mean that the EA will, at times, attempt to take trades in contravention of NFA hedging and FIFO rules, thereby rendering it unsuitable for the vast army of US-based users who unfortunately have to abide by the NFA rulings. Fortunately the EA contains a couple of external parameters which disable both its hedging and FIFO aspects to satisfy those US users. I should say at the outset, however, that I haven't tested these particular features of the EA in any way and can't offer any guidance as to their effect on the EA's performance.

Secondly, and whilst on the subject of compliance, I suppose I should quickly mention that the EA sets its SLs and TPs only once an order has been opened, and is therefore fully ECN/STP broker compliant.

Regarding the three different strategies which are employed by Forex Combo, I can best describe them as follows:

Strategy 1 is a scalping strategy. Users set a parameter which evaluates the strength of a trend. If the trend possesses sufficient strength AND a different oscillator reaches a certain level, Forex Combo will enter a trade. The EA then sets a fixed pip stop-loss (default values are 100 pips fiber, 160 pips cable) and take-profit (22 pips fiber, 27 pips cable) which remain fixed throughout the duration of the trade. If the oscillator reaches a different level, Forex Combo closes the trade. The outcome is that trades either hit the fixed SL or TP, or they are closed using the internal witchcraft because the oscillator has hit the right number. Unsurprisingly, and in common with most scalping EAs, the combination of low take profit values and high stop-losses results in a relatively high win rate of between 75% and 80%, and Forex Combo should take around 3 trades a week on each of its two symbols using the scalping strategy, which represents over half of the EA's total trades.

Strategy 2 is described as a trending/breakout strategy. Forex Combo casts a spell to enter a trade, and then sets a relatively low SL (33 pips fiber, 60 pips cable) with a high TP (default 300 pips fiber, 300 pips cable). It then trails a stop-loss behind the price action if or when the trade moves into profit. The high TPs are very rarely hit and trades tend to be closed either by some internal magic or because the price retraces causing the trailing stop to be hit. My strategy tests will demonstrate that the effectiveness of the trending strategy varies considerably, and win rates are less than 50%. This strategy isn't employed very often, and only represents 2 or 3 trades each week on average split between both currency symbols.

Finally, Strategy 3 is a counter-trend/reversal strategy. This strategy is time filtered and it only seems to enter its trades during pre-Asian hours when the market is often at its quietest, only taking on average around 1 trade per week per symbol. Again, having entered a trade, the EA sets a fixed stop-loss (default 70 pips fiber, 260 pips cable) and take-profit (160 pips fiber, 100 pips cable). It also trails a stop-loss and, like the other two strategies, trades can be closed using some internal hocus-pocus. Although trades are entered using a time filter, they can stay open for several days which struck me as being rather unusual for a system with a time filter. Time-filtered trades are typically closed within several hours and normally before the next time session opens. In addition, my backtests suggest that the win rate of this strategy varies considerably between 67% for fiber and 79% for cable. I suspect those win rate inconsistencies are probably due to the different default risk/reward ratios being used on each symbol, although I do get the impression that this particular strategy just happens to be something that the developer has stumbled across which works, rather than it having any proven technical foundation.


Setting Forex Combo up

The fact that there are separate EAs for each symbol makes for a relatively easy setup, as the EA can run 'straight from the box' if wanted without a need to adjust any settings. That said, there is an extensive list of external parameters that the user can adjust if he's that way inclined. I am assuming that Forex Combo's indicator and TP/SL values have already been optimised prior to the EA's release so, from my perspective, I am only really interested in the obvious external parameters such as risk, slippage, etc.

On the subject of risk, Forex Combo can trade either fixed lots or, as stated within the manual, it can set its trade sizes as a percentage of the account free margin. On this point, I have to admit that I initially misinterpreted that paragraph of the manual, and I will explain more about this problem in a moment. As explained previously, the EA also contains parameters to turn each of its three strategies on or off, and there is another ominous external parameter called "LossFactor" which is Swahili for Martingale. The merest mention of the word Martingale brings me out in a cold sweat, and it certainly won't feature in any of my tests as part of this review.

Each Forex Combo licence can be used on one live account and an unlimited number of demo accounts. Users need to visit the members area of the Forex Combo website to enter and activate the account number(s) on which they wish to use the EA.


The Strategy Tests

Normally, I would run my strategy tests through with 2 or 3 different brokers to get an idea of how sensitive the EA is to different spreads, broker digits and broker lot sizing. In the case of Forex Combo, however, I wanted to test each strategy individually on each of its two currency symbols and it was pretty clear from the outset that my review would go on forever and the web-page would take an eternity to load if it were littered with countless images of balance curves from different brokers. I therefore opted to only test the EA using MetaQuotes History Centre data on a Tadawul MT4 platform, as Tadawul's performance should, in my opinion, be reasonably indicative of what the average user can expect to achieve. Obviously if you prefer to use a true ECN broker with razor-sharp spreads, then it should go without saying that the EA's performance is likely to show an improvement on the Tadawul performance.

For my first tests, I ran the EA through on both symbols with all three strategies set to run concurrently. For this test, I set the risk parameter to 3.0 for all three strategies, and the results are shown below:


Tadawul - EURUSD - 2.0 pip spread - Trading All Strategies - Risk = 3.0
Forex Combo Strategy Test


Tadawul - GBPUSD - 3.0 pip spread - Trading All Strategies - Risk = 3.0
Forex Combo Strategy Test

Having run these tests, I immediately noticed something that I wasn't comfortable with. I had wrongly assumed from the instruction manual that a risk setting of 3.0 meant that I would be risking 3.0% of my account free margin on any single trade. WRONG!! When I read the manual once more, I realised that the risk value is little more than an arbitrary number which has nothing to do with how much you stand to lose if a trade runs straight to its stop-loss.

To explain a little more, I come from a school where I was taught to never risk more than a small percentage of my account balance on any one trade. For relatively small accounts of $10k or $20k, that percentage may typically be around 4%, although the percentage risked would decrease as the account got larger. At school, I learned how to calculate my position sizes according to the percentage I was risking and the distance away of the stop-loss. For instance, if the stop-loss was 100 pips away, I was taught to take twice the size position than if the stop-loss was 200 pips away. If either of those example trades went wrong, my loss would still be the same even though one trade was twice the size of the other.

In the case of Forex Combo, it was pretty evident that the EA doesn't use the stop-loss distance in its lot sizing calculations. Combo's stop-losses vary by default between 33 pips and 260 pips, and its lot sizing should vary from trade to trade so that it suitably reflects those variations.

As mentioned previously, I've had Forex Combo in forward test for a while, and it had been set up to risk what I'd understood to be 3.0% of the account. Its trades are being published to MyFxBook on this link, and when I looked at them in detail I noticed that a couple of the individual losses so far have been as high as 7%. Oh dear.


Forex Combo Risk

Having identified what I considered to be a problem with how I had set up Forex Combo, I then attempted to adjust the risk settings of the individual strategies to balance the lot sizes such that they were risking closer to the 3.0% of the account balance I was looking for. I have to say that my attempts at doing this are very much a case of 'trial and error' as it's something that would be far better done through an internal code modification than through altering an external parameter setting 'on the fly'.

Having adjusted the various risk settings to risk approximately 3% of the account per trade, I then repeated my tests. The risk settings I decided upon were:

EURUSD - Strategy 1 - risk = 2.5
EURUSD - Strategy 2 - risk = 6.0
EURUSD - Strategy 3 - risk = 3.0
GBPUSD - Strategy 1 - risk = 2.5
GBPUSD - Strategy 2 - risk = 3.0
GBPUSD - Strategy 3 - risk = 1.3



Tadawul - EURUSD - 2.0 pip spread - Trading All Strategies - Risk = variable as described above
Forex Combo Strategy Test


Tadawul - GBPUSD - 3.0 pip spread - Trading All Strategies - Risk = variable as described above
Forex Combo Strategy Test

I must admit that I found it interesting that my risk adjustments resulted in reduced relative drawdowns on the GBPUSD symbol, but increased drawdowns on EURUSD, even though individual losses were now being limited closer to 3% of the account balance as intended. I guess it just goes to demonstrate that trading isn't an exact science and, if it were, everybody would be doing it.

Unperturbed, my final set of tests involved running each strategy on its own for each symbol. I've reduced the image sizes to help the page load a bit quicker. In the image links below, strategy 1 is displayed on the left, strategy 2 is in the centre, and strategy 3 is on the right.


Tadawul - EURUSD - 2.0 pip spread - Individual Strategies 1, 2 and 3 - Risk = variable as described above
Forex Combo Strategy TestForex Combo Strategy TestForex Combo Strategy Test



Tadawul - GBPUSD - 3.0 pip spread - Individual Strategies 1, 2 and 3 - Risk = variable as described above
Forex Combo Strategy TestForex Combo Strategy TestForex Combo Strategy Test



Conclusion

My main frustration with Forex Combo relates to the issues with setting suitable risk levels as I described above. It would be nice to see a coding modification to address this problem in a later release. As things stand, prospective users do need to do a bit of homework before running Forex Combo to satisfy themselves that they will not be over-trading. Those frustrations aside, clearly each individual strategy tests differently to either of the other strategies as can be seen from the obvious differences within the set of six balance curves above. Overall, however, the three strategies do appear able to work together with reasonable harmony, although the combined balance curves do clearly show several periods during the course of the strategy tests where the EA would be susceptible to prolonged drawdown periods lasting several months on end.

In keeping with previous practice, I have carried out a risk simulation of my strategy test results to get a better idea of the EA's weaknesses. I have performed a risk simulation on each individual strategy as well as on the combined analyses.

Forex Combo Risk Simulation

What is interesting about Forex Combo's scalping strategy is that, at around 17 or 18 pips, the average pips won by the strategy is considerably higher than the typical scalping EA which often banks profits of under 10 pips. The scalping strategy also demonstrates a reasonably attractive risk/reward ratio and should require only a relatively small account deposit to get started.

Although the trending and reversal strategies both enhance the Combo system's overall performance, their use does also result in increased drawdowns and they require a considerably higher deposit in order to run the EA safely. The drawdowns would obviously be controlled through the individual risk parameters as I described in detail above, but I can see that anybody starting to run Forex Combo with only a small initial account deposit might wish to turn strategies 2 and 3 off completely until such time as their account balance had grown and they could run the other two strategies with a greater degree of safety. This would be quite understandable.

What did concern me from the risk simulation was the fact that the maximum drawdown when running both currency symbols was nearly twice the amount of each of the individual symbol's drawdowns. This suggested to me that the EA might be susceptible to drawing down on both symbols concurrently. If this were to happen, it would be best to either only run it on one symbol, or two run it at half the normal risk on both symbols so as to limit the drawdown.

To find out if this were indeed the case, and to err on the side of caution, I plotted fixed lot balance curves for each symbol to get an idea of where the drawdowns were happening exactly. The worst case drawdowns are highlighted by the red section of each plot below.


Drawdown Corellation EURUSD


Drawdown Corellation GBPUSD


Despite the fact that the maximum drawdown on both currency symbols occurs very close to the start of each test, it looks to me that this was just a minor blip as the plots then continued along their own separate paths and any correlation between the two symbols appears to be only minimal. It's my considered opinion, therefore, that there's insufficient correlation between the two plots to warrant either removing one of the symbols or lowering the risk, and I would be looking for the two plots to match each other more closely if I were to take those steps.


Forward Test

Having carried out the various tests and prepared my review, I've decided to alter some of the initial risk settings in the hope that it will result in a smoothing of the equity curve. The forward test is on a $5k raw spread true ECN FXCC demo account, and it was originally set up with all strategies trading at risk 3.0 at a time when I mistakenly believed that this level represented a percentage of the account balance. I've subsequently changed those original risk settings as follows:

EURUSD - Strategy 1 - risk = 3.5
EURUSD - Strategy 2 - risk = 4.5
EURUSD - Strategy 3 - risk = 3.0
GBPUSD - Strategy 1 - risk = 2.5
GBPUSD - Strategy 2 - risk = 3.0
GBPUSD - Strategy 3 - risk = 1.3


Hopefully, those new risk settings will result in improved performance onwards of this review date!

FXCC do not need to comply with NFA hedging and FIFO rules, so these features of the EA are disabled within my forward test.

The EA's other settings have generally been left at default, although I have set the allowed slippage to zero and am limiting Forex Combo's maximum allowed spread to 2.0 pips on EURUSD and 3.0 pips on GBPUSD.

As with my other robots in test, you can monitor Forex Combo's performance at MellyForex by clicking here and there is an existing thread on the MellyForex Forum here.

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