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How To Test Your Broker's Latency

The LatencyEA measures the latency to your broker's MT4 serverA rise in recent months of the number of EAs which trade so-called impulse spikes (such as Forex Thor) has meant that a lot of questions are now being asked about latency.

Latency is, broadly speaking, a measure of the time taken to send the packets of data from your PC to your broker's server. A poor connection to the broker's server could result in orders failing to execute at the desired price and trading opportunities being missed. What might seem like a very good EA to some users, may easily turn into an absolute nightmare for others!
I say 'broadly speaking' because, to the best of my knowledge, there's absolutely no way of measuring how long it takes to make the one-way connection between the two machines. Instead, we can only measure something that is called round-trip latency.

Round-trip latency is actually a three-part process because it includes not only the two each-way trips from one machine to the other and back again, but it also includes the element of time which is taken by the broker's machine to process the instructions that have been sent and compile a suitable response. For instance, if each trip takes 200 milliseconds, and the broker's server takes 100 milliseconds to execute any instructions and compile its response, then the round-trip latency will be 500 milliseconds; the one-way latency will only be 200 milliseconds and all the important bits and bobs will have been sorted out on your broker's server after 300 milliseconds.

Capisci?

So how can we measure latency to get some sort of an idea whether our connection is any good or not?

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Cut Your Losses And Let Your Profits Run

When I was recently working to prepare the new EA Analysis pages at MellyForex, something obvious struck me and I thought it would be a good idea to write a short article to explain my thoughts. I then wrote an EA review article the other day which reminded me of that earlier promise to myself so, without wishing to procrastinate any longer, here goes.

As part of the Advanced Statistics of each EA in test, there is a tab called 'Duration' that readers can click on. Clicking this tab displays a scatter graph comparing the profit or loss in pips of each trade taken by the system against the duration of each trade.

As I was browsing through the different pages for each EA, checking the data and charts for accuracy as part of the testing process, I noticed one EA which had taken quite a lot of trades whose trade duration scatter graph looked like this:

This graph shows that the EA holds on to its losing trades for a longer period of time than it holds its winners

What struck me the most about this graph was that it was a classic example which displayed everything that I didn't want to see, despite the fact that the EA in question has demonstrated both reasonable profitability and safety during its time in the MellyForex forward test.

So what's wrong with that graph?

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New analysis features at MellyForex

MellyForex is pleased to announce new EA analysis featuresIt's not very often that I get a chance to blow my own trumpet, but I am rather pleased with the latest feature to go live at MellyForex so, hey, I guess it's OK to bring out the bunting and have a bit of a toot.

Since MellyForex started, regular readers will know that I've been publishing the results of all the EAs in forward test to MyFxBook. MyFxBook is a great website in my opinion; it's stylish and some of their analysis tools are very useful, however, I have had problems with some accounts not verifying and I recently noticed that a couple of EAs hadn't updated at all for 4 or 5 months.

With that in mind, I decided a while ago to build a new section on MellyForex where the EAs could publish their results and their performance could be analysed.

I'm pleased to announce that work on the new analysis section is now complete, and all results publishing is now being done in-house. Readers can access the statistics for any EA in forward test by visiting the leaderboard here and then clicking on the name of the EA whose performance they wish to view.

Each review/article at MellyForex has also been updated so that the old links to MyFxBook pages now point to the relevant page on MellyForex, and the old MyFxBook pages have been deleted.

I'm always open to suggestions for improvement of the analysis layout and features, so don't be shy with your suggestions.

In the meantime, please enjoy!

An Update Regarding Plimus

Plimus have suspended the accounts of Forex EA sellersMany of you reading this will already be aware that, as of a couple of days ago, Plimus decided to suspend accepting new orders for Forex related products.

Without prior warning, on the 10th January, Forex vendors selling their wares through the Plimus network received an email similar to the one below:

The credit card associations (including Visa and MasterCard) are increasing their scrutiny of merchants selling products within a number of online segments. Affected market segments include, but are not limited to, the following:

- Online auctions
- Foreign Exchange (FOREX)-related products
- Media
- Poker chips and other virtual currency

As you offer products that fit within one or more of these segments, Plimus must now undertake a detailed and exhaustive review of your account, and its compatibility with the Plimus platform. This review will take approximately 30 days; at its conclusion, we hope to be able to advise you that we can continue to provide e-commerce services to your business.

During the period of this review, we must undertake two steps. First, the payout scheduled for the 15th of this month will be suspended for a period not to exceed 30 days, pending our confirmation that all transactions will be honored by the card associations. Second, your account will be suspended as of Thursday, January 12th, which will mean that no further transactions can take place until further notice.

We recognize that this represents a significant business challenge, and apologize for the inconvenience. If you believe your account should not be considered to be within one of the stated market segments, or if you have any questions of concerns, please contact Vendor Support directly."


So, what does all this mean?

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MellyForex October Update

Halloween PumpkinDespite recent unsettling effects on the markets caused by global economic woes, and the unending advice suggesting that automated trading systems should be turned OFF completely until after the dust has settled, the number of profitable EAs in forward test at MellyForex has increased over the last month, from seven at the end of September to no fewer than twelve by the time everybody was out 'Trick or Treating' over Halloween.

Admittedly, I've got more robots in forward test now than I had a month ago, but I find it particularly refreshing that there are a couple of EAs which I've reviewed previously that backtested well, but hadn't been performing in forward test. This month they've made it into the top part of my leaderboard!

The point here is, I believe, that it's very difficult when you look at a 10-year/3,000 trade backtest curve which has been condensed into a relatively small 820 pixel wide GIF image, to fully appreciate that the backtest might show the EA having endured periods lasting 6 months or even a year during which it may not have been profitable. It's understandable, therefore, that the best EAs aren't always going to return a profit immediately they come out of the box. This is highlighted by the Monte Carlo simulations that I conduct within my reviews which suggest most EAs only offer a 30% or 40% probability of an account balance never dropping below its initial deposit. In other words, as many as 60% or 70% of EA users are going to have to suffer a bit of pain before they get the gain!

For what it's worth, I sometimes get the impression that a lot of people just look at the start and end balances of a backtest equity curve, but don't look closely enough at the shape of the curve in between. This leads to systems being dismissed unfairly after two or three bad months, simply because the average EA user doesn't fully appreciate either the risk involved or quite how much patience is needed to trade successfully.

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Normal Service is Partially Restored - MellyForex September Update

Latest NewsHaving witnessed several EAs struggling in drawdown over the last couple of months as I discussed within my August Update, I'm now pleased to report a modest upturn in fortunes during September. Although positions at the top of my Live Robot Leaderboard have rotated slightly from a month ago, the top slots are still occupied by the same half dozen Expert Advisors as have been there for a reasonably long time, and I expect that trend is likely to continue for the foreseeable future.

The difference this month, however, is that the top six EAs have now been joined in their ranks by a couple of additions to the Profitability Club, namely FxPowerCube and Forex Combo.

Although I've had Forex Combo in forward test now for well over two months, this is an EA that I haven't yet got round to analysing in any detail.

Despite my honourable early intentions, there is actually a very simple reason why I haven't yet got round to reviewing Forex Combo. To explain more, the EA started off very well in forward test but, after a couple of weeks (and in line with so many other EAs at the same time), it then went into drawdown which has so far peaked at nearly 23%.

As my current 'To Do List' occupies nearly a whole ream of A4 paper (I really should try harder to save trees ), the drawdown meant that my plans to review Forex Combo got pushed further and further down the list.

Forex Combo's recent move into the profitable part of my leaderboard, however, means that the time is probably right to revisit the idea of a review!

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Take Heart, The St Leger Stakes are being run on 10th September - MellyForex August Update

St LegerIn case anybody either knows nothing about horse racing (I've got to admit, I don't know much about it myself), or is wondering what on earth a horse race has got to do with a Forex Reviews website, I suppose I'd best explain.

Nearly everyone who has been around the London Stock Market for any period of time will have heard of the age-old saying "Sell in May, go away, don't come back until St Leger's Day". I suspect that religious types may rush to point out that St Leger is the patron saint of some lost cause or another but, in the context of this article, it refers to the four day horse racing festival which takes place at Doncaster racecourse every September culminating in the world's oldest Classic, The St Leger Stakes.

So what does this age-old saying actually mean?

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MellyForex July Update

MellyForex July Update I had hoped to be able to report around this time that I'd put another robot or two into forward test but, unfortunately, that isn't the case. The truth is that I haven't seen anything new over the last few weeks which has captured my interest sufficiently to put into test and write a review.

C'est la vie!

All is not lost, however, as it has given me the opportunity to provide a general update on progress and to cover several minor points which wouldn't otherwise be worthy of an article of their own.

Recent movement on my Robot Leaderboard has been less dramatic and it's becoming increasingly obvious which are the good quality robots and which are the ones that will never make the grade.

PipRider has regularly occupied one of the top spots since first going into test and, despite struggling a little with market conditions over the last few weeks, it is clearly developing a reputation for being one of the safest robots around.

Wall Street Forex Robot has been going from strength to strength and it is now safely holding on to first place on the leaderboard. One of the reasons for this is the fact that it is able to trade four different currency symbols, so those extra trades mean that it is always going to win more pips than, say, PipRider which only trades one symbol. Coupled with this, the effect of using an EA with multiple symbols can have a smoothing effect on the balance curve and serve to lower drawdowns.

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