We do not know what use was made of the Holy Grail, if it had ever
existed. Nowadays, perhaps some forex robots and trading signal
software hold the key! However, if the Knights of the Round Table
derived any advantage from any association with that legendary item,
history doesn’t provide a lot of details on the nature of the benefits.
It seems the bards and the poets of the Medieval era were the greatest
beneficiaries of the Grail legend, selling their tales at the courts
and ensuring a full stomach in the process, if not more. The tradition
is alive even today, with “Holy Blood, Holy Grail”, the “Da Vinci Code”
all reaping their share of the profits from the propagation of this
ancient, dubious, yet highly entertaining legend.
The currency trading field has its own share of these bards and
poets, each telling the same story from a different angle, embellishing
it with new and exciting details on the unimaginable benefits, the
unparalleled gains that one can achieve once he is in possession of the
Holy Grail, the Forex Code, the Universal Secret of Trading, the Best
Automated System in History. Times change however, and the blood of
Christ no longer has the same powerful impact on the minds of believers
as it had in the past. Nowadays, the scientifically minded, but
gullible individual will seek the Holy Grail in some kind of
mathematical formula, a numerical trick, some technical tool that will
reveal the secrets of profitable trading to the entire universe.
Forex Robots
What is a forex robot? This is a kind of program developed by some
high-school educated individual, which purports to be able to eliminate
the human factor from trading entirely. Since programs, API’s, do not
respond emotionally to market developments, we’re told that they
possess a clear advantage over the human trader who is constrained by
his natural disposition to shout, weep, laugh at sharp turns in the
market. In this era of automation, the proponents of automated trading
propose that we are fools to draw charts manually and to analyze every
twist and turn of the market with eyes glued to the screen, especially
when the computer can be programmed to do all these in our place and to
do so with an efficiency that is impossible to match for a human being.
Since everyone emphasizes the importance of discipline during trading
decisions, of the crucial role of solid rules which are followed with
punctuality and consistency, the creators of these programs submit that
there is no better choice than leaving all the practical aspects of
this task to an automated program.
In order to establish the validity of their claims and to
demonstrate the purported prowess of the robot, the sellers of these
curiosities will couple their sales letters with a large record of back
testing data that shows the irrefutable power of automated trading – in
hindsight. Very large profits with little drawdown, consistent gains
over many trades all convince inexperienced traders that the Holy Grail
is within reach finally. If only it were possible that Percival and
Lady Guinevere were here, how merry everyone would be! But we will have
to contend ourselves with the tremendous profits we’ll make while
utilizing our new robot, which we bought for about $500.
But will we really make those great profits or are we just helping
to fill the stomach of the bard for the entertainment value? What does
a forex robot or an automated trading program really do? It must first
establish some rules for the trade which will be in the form of some
technical indicators or price patterns as evaluated by the computer.
Then it must apply these rules for profiting from market events, as
signals are generated throughout the trading day, and into the future.
What does the back testing prove? If the rules were applied in the
past, the program would have registered profits. What must the program
do? It must make profits for us in the future because historical
profits may make us smile, but they will not add a penny in our pockets
– unless we’re selling a forex robot.
Now, if the program established potential success in the past, why
can’t we expect the same results to be repeated in the future? Since
the charts look very similar on the whole, why can’t we expect those
back testing results to be transformed to future profits? There’s this
little disclaimer at the bottom of every legitimate forex broker’s
webpage, which states that past performance does not guarantee future
results. What does that mean? It means that financial markets
are chaotic processes in which the prevailing rules change all the time
according to dynamics which are not well understood as yet. In
other words, the technical rules that are valid today will not be valid
tomorrow. The technical methods that generate profits today will not do
so in the future, because the mathematical processes that define the
price action change all the time. Most definitely, there’s no single
mathematical process or formula that can be applied to generate
consistent profits in the market. All that the back testing
results prove is that at some point in the past, there were technical
methods the use of which could be profitable for the trader. But we
want to know what the successful technical method will be tomorrow,
not two days ago, as we don’t own a time machine that will deliver us
back in time to trade the markets with the hindsight we possess.
And if you have any difficulty in accepting the above statement,
consider your own experiences in the forex market: How many times have
you seen that a technical indicator, a trading strategy, a combination
of technical tools that worked five minutes ago, is unsuccessful just a
short while later? Now wouldn’t you laugh at yourself if you had taken
the combination that had worked five minutes ago and declared it to be
a universally valid tool for all time? We know for sure that regardless
of how successful our technical configuration was five minutes ago, it
will fail regularly in the future because of the random nature of price
movements.
But some will contradict us and say:
“The back testing results are used to choose the trading systems
that were consistently successful over a much longer time than five
minutes. You’re simplifying the methods and tools of the creators of
these systems grossly, and putting yourself in a ridiculous situation
by the simplicity of your argument.”
To that we will respond by reminding the traders of the fractal
nature of the price graphics. In other words, the price action has a
strange tendency to repeat itself with very subtle changes over a long
period of time. The patterns observed in a five-minute chart can still
be identified in a five-year chart. The randomness, unpredictability of
the price formations are no different on five-year long charts than
they are on five minute charts and the length of the back testing
period is of very little consequence as a result. If a trading robot
can be shown to trade successfully on five minute charts only on a
consistent basis, that would be a powerful hint of its eventual
applicability to many more time frames too. There has never been such a
forex robot and if there will be one in the future, it will definitely
use very different methods for trading the markets.
Trading Signal Software
Trading signal software are similar to the forex robots that we
discussed above, but instead of automatically executing the trades on
our behalf they will create signals and alerts on the basis of which
the trader can make his own trading decisions. In other words, these
tools will do the analysis for you and then it is up to you to evaluate
the price pattern. How useful are they?
The problem with this type of automation is similar to that with the
forex robots but it is a somewhat milder version. Signals generated in
deference to some arbitrary rules are unlikely to have much credibility
in the complex and constantly changing trading environment. Indeed, it
is not hard to generate signals in any market: Just combine and
rearrange the indicators a number of times and there will always be
some that suggest a potential trade. The difference between a valid
trading signal and an invalid one is only clear in hindsight.
Identifying such opportunities requires a flexible analytical attitude
that can balance and weigh the various inputs from many sources
according to the nature of the market, the time period and the market
psychology. None of that can be recognized or evaluated by a machine
that will churn out the same results based on the same unchanging
algorithm all the time.
Let us recall that one of the most important aspects of a successful
trading strategy is the ability to adapt to changes. The trading signal
software is incapable of doing so because it is supplied with a
predefined set of rules the basic mechanism of which remains the same.
Instead of wasting his time on deciding which of the signals issued by
the various systems at his disposal is correct, the trader can study to
refine his understanding of the markets and do his own job for himself
which will be far more rewarding than the random gains or losses
registered by the use of these products.
Conclusion
If all those tools were generating the profits their creators claim,
it would be illogical to sell them in the first place. After all,
traders have been trying to beat the markets for generations; one would
not even need to trade if he were able to solve this great problem so
efficiently. Such a person would be an instant celebrity, invited to
meetings and panels all around the world by large financial firms and
universities. Just the fees charged for a public speech would be equal
to hundreds of copies of the trading software sold online, and the
creator of the method would live the rest of his life comfortably
without having to do much.
If these forex robots and related tools are so successful, why would
the creator waste his time marketing it to retail investors through
online advertisements? It would be easier and far more lucrative to
sell the product to richer clients, such as banks and hedge funds, who
would be able to pay far greater sums for a truly successful secret
trading tool. Unfortunately for the robot inventors, those large
institutions would not even turn the cover page of the sales letter
advertising the product, sending it quickly to the trash bin.
In sum, even a medieval warrior with all his superstitions and
misconceptions about the nature of the universe and the causes of every
day events, would be unlikely to believe the offers of a street peddler
offering to sell the Holy Grail for one or two gold pieces. While many
did believe in the existence of such an item, the Epic Cycles of the
Middle Ages emphasized the necessity of a good character, virtuous
practices and a decent life for its attainment. As real artists, unlike
the amateurish con-artists of today, the bards were able to inspire
people in the correct direction, although the fundaments of their
beliefs were not very meaningful. Instead, the creators of these
automated forex holy grails invite traders to close their eyes and pay
them, and then to use these tools while remaining ignorant about how
they work, or what they do.
If there is a real Holy Grail in trading, it is certain that it
cannot be attained by throwing away $500 to some random, talkative
online peddler. In fact, the ancient principles are still valid:
Control your emotions, study the markets, learn about the fundamentals
that drive economic events, refine your character to suit the demands
of a trading career and all will be well for you. We cannot guarantee
that you’ll acquire the Holy Grail somehow, but we can assure you that
the benefits that you’ll derive from obtaining the correct attitude
will be hundreds of times more useful to you than any kind of snake oil
product bought online.
http://www.forexfraud.com
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