In case anybody is thinking that's an unusual way to begin a Forex EA article, you're dead right!
The truth is, though, that I really don't have a clue at this stage how I'm going to explain my thoughts on the Forex Gale Expert Advisor which I've put into forward test this week. I'm just going to scribble everything down and hope that it makes some kind of sense by the time readers get to the end of this article.
Anyway, I've had my eye on Forex Gale for a few weeks and, a couple of days ago, I asked the developer for a review copy. His initial response was to send me a copy of the full version of the EA and he also suggested at the time that I open an Alpari demo account for the purposes of testing his EA.
When I replied that I was currently testing EAs on FX Central Clearing raw spread ECN accounts, his response was that he had never tested Forex Gale on an FXCC account, so "didn't know how it would work".
Although this remark didn't alarm me as such, it did give me some clues as to what to expect, and I'll explain more about that shortly.
The Forex Gale EA is delivered in the form of six different Expert Advisors. The EA employs three different strategies, each strategy being coded within a separate EA, and different copies of each EA are provided for use with either 2/4 digit brokers or 3/5 digit brokers. I don't understand why the broker digits couldn't have been hard-coded into the EA to make the product more user-friendly. Similarly, I'm not sure why all three strategies couldn't have been combined into one, as I happen to believe that commercial products should be made as 'idiot-proof' as possible.
Those personal niggles aside, Forex Gale users can choose which strategies they wish to run, be that just one strategy on its own or all three strategies combined. In addition, each strategy runs on six different currency symbols, meaning that users will need no fewer than 18 chart windows open in order to run all three strategies on every suitable symbol.
To quickly summarise Forex Gale's strategy, it is a grid trader which uses limit and stop orders to enter the market with a normal 3 hour expiry time before an unfilled order is deleted. Having entered a trade, the EA doesn't use either a stop-loss or a take profit value and, instead, uses internal logic to exit trades once the combined profit of all the open trades reaches a certain amount.
All grid traders invariably fail when they get on the wrong side of a major trend, and add to the losing positions to such an extent that the trader gets margined out of the market and is forced into closing everything for a massive loss. By using multiple symbols and strategies, Forex Gale looks to hedge its open losing trades from one strategy with profitable trades taken in the opposite direction by one of its sister EAs running the strategy on a different currency symbol. Once the basket of trades taken on the group of six chart windows reaches the desired profit level, then every open trade on every symbol which has been taken by that strategy will be closed simultaneously. In addition, any open unfilled orders will also be deleted ahead of their expiration, and the EA will start its cycle over again.
The EA's hedging approach does mean that that any US-based trader who is subject to the NFA's non-hedging rules will only be able to use one of Forex Gale's strategies at a time, although they would still be able to use multiple symbols to group the trades together.
Before putting Forex Gale into forward test, I firstly ran the EA through the strategy tester on a couple of symbols using Tadawul who are an older-style 4-digit fixed spread retail broker. I generally use these backtests to get some sort of idea of the sort of performance typical Forex clients can expect. There's no point in discussing these tests in any detail at this stage, but the tests did suggest that Forex Gale would be likely to take between 50 and 100 trades per year for each strategy/symbol. I thought from those initial tests that I was looking at an EA which would probably take around 30 trades a week if used on all 18 chart instances.
I then looked once more at the developer's website and noticed a link to an Alpari account running all strategies on all symbols and saw that, at the time of writing, it has taken 491 trades in 3 weeks. This is around 5 or 6 times as many trades as my Tadawul tests had suggested.
Having then put Forex Gale into my FXCC forward test, it started opening orders left, right and centre. In its first 7 hours, it opened and closed no fewer than 90 trades and also had a further 19 open trades. If Forex Gale continues at that rate, it could potentially take over 1,500 trades a week!!
If that does indeed prove to be the case, the forecasters will have got this EA wrong and it will require reclassification as a full Category Five Hurricane instead of just a gale. :roll:
In short, therefore, I really don't know what to expect from Forex Gale going forwards. I can only monitor its performance in the days, weeks and months ahead, and I hope readers can now understand why I began this article in the manner I did.
Having noticed the lack of trade correlation between the strategy tests and forward tests, and having given the matter some thought, there is an important issue here which I can see will render Forex Gale's strategy test results as worthless. Because it's only possible to test one EA at a time in the MT4 Strategy Tester, it's impossible to tell precisely when trades would have been closed as a result of the hedging performed by trades taken on other symbols within the group. The trades in my backtests would invariably have been closed far sooner than the backtests suggest because of this. Likewise, fresh trades would have been opened in their place which won't show at all in my backtest results because the previous trades in the tester hadn't yet been closed.
This certainly explains why my initial backtest results suggested Forex Gale would take far fewer trades than is being seen going forwards.
Regular readers will know by now that strategy test results normally form a significant part of my reviews. Those strategy tests not only give an insight as to how and when an EA is likely to trade, but they also give indications of suitable safe risk levels to use when setting the EA up in forward test. Being unable to properly backtest this EA is going to make it very difficult to draw any early conclusions of its capabilities, and the only way to proceed looks to be through forward testing alone. The only likely conclusion is that it will almost certainly work best with a 3/5 digit raw spread ECN broker outside of the US who doesn't have to comply with NFA regulations. It will then be able to hedge losing trades and will be able to exit its basket of trades quickest.
US-based users who are restricted to running just one of the three strategies, or users who run Forex Gale on just one or two symbols, are invariably going to find that average trade durations are longer and drawdowns will probably be higher because the EA won't be able to profitably exit its trade basket so easily.
For now, I've set Forex Gale up on a raw spread FXCC ECN account. It is trading fixed 0.1 lots and is aiming to bank profits of 0.35% of the account balance for every symbol which has an open trade. So, if it has trades open on 3 symbols, it would bank profits once the total open profit was 1.05% regardless of whether there were 3 trades or 30 trades open within the group at the time.
Hey, at least I think that's how it's meant to work. :?
[edit - 27 Sept 2011: The developer has confirmed that this assertion is actually incorrect and the target profit is only 0.35% (default setting) across the whole group of trades. My first few trades seemed to be closing for considerably more than 0.35% profit which led to me to deduce that the target profit was being multiplied by the number of symbols with open trades. I suppose it's possible that I was witnessing several groups closing at the same time and mistakenly thinking that the trades were all from the same group]
Being a raw spread broker, FXCC charge a commission on each trade which will erode the profits. If Forex Gale needs to open 30 trades to bank its profit, it means that the commissions will erode profits more than if the EA can bank its profit from just 3 trades. For some reason, Forex Gale seems to include overnight swaps within its open profit calculations, but it doesn't include commissions. It would be very easy for the developer to make the necessary modification so that Forex Gale's open profit calculations included the commissions as well.
Despite the commissions, I still believe that raw spread ECN is the way to go with Forex Gale as profit targets are going to be reached that much quicker. I also noticed that the EA allows slippage which is equal to the spread at the time it trades. This means that using Forex Gale on a conventional fixed spread retail broker could work out very expensive if the broker decides to help himself to some slippage at the trader's expense!
The EA is running using all three strategies on all 6 suitable symbols (EURUSD, GBPUSD, AUDUSD, USDJPY, USDCHF and USDCAD). Although I'm using fixed lot sizes at the moment, the EA does seem capable of increasing lot sizes proportionally to the account balance. Because I don't know what level of risk I'm taking and what sort of drawdowns I should expect at this current stage, I want to see first how it performs using fixed 0.1 lots before investigating this particular feature of the EA further.
You can monitor Forex Gale's performance at MellyForex by clicking here and there is also a thread on the MellyForex forum here for users to discuss the EA.