Currency Secrets

Back in March Malcolm from Excalibur Forex offered readers of Currency Secrets free access to his signal service for a month.

Having now used Excalibur’s services for over 6 weeks I can provide my opinions on his service.

The things that I liked about Excalibur Forex was its simplicity of signals. Excalibur only trades the 4 major currency pairs, as well as the AUDUSD, the USDCAD, the EURJPY, and the GBPJPY. Each signal is sent out at 0000 GMT (and some times a little earlier) and even though there were days where I’d only access these signals an hour or two after they had been sent I still had no problems getting in (the market isn’t that volatile around that period). I will also add that the majority of exits where either through trailing stops set from the previous day or a target limit orders – with only one trade being exited at market during my sample.

The way in which I tested Excalibur’s system was by risking US$500 on each trade (which equated to 1% on my fresh demo Oanda account). I would then calculate the position size needed using Oanda’s FXMath Profit Calculator based on entry and stop loss prices.

Unfortunately during the testing period Excalibur wasn’t profitable. With risking US$500 per trade the account never went above starting capital and slipped to as low as US$45,022.60 (a tad under a 10% loss). The ending equity was US$46,174.16 (a 7.6% loss) and this excluded the profit/loss of the two open positions as at 30 April 2007.

Now I can understand the unfortunate luck of reviewing a service during a down month, so this isn’t my biggest concern, my biggest concern is whether what was reported as the ending profit/loss for the period was in fact what I had.

Excalibur report that the ending profit/loss in pips for April was -135.

My ending profit/loss in pips for April was +85 pips (BTW my opening balance as at 1 April 2007 was US$46,762.26 – so I still lost money)! Firstly the discrepancy for the difference in pips made lay in several factors: first there was an erroneously placed order on the web site to buy the USDCAD (Malcolm reported a stop loss higher than the entry price) I didn’t place a trade and informed Malcolm of the error, and by the time it was corrected the trade had already hit its stop loss – losing 60 pips). The other discrepancies lay in the EURUSD and USDCHF trades where it was by sheer luck on my part that I entered the order 2 hours late. I still kept the orders active, but the currencies never came back up and hit the entry price each losing 55 and 85 pips respectively.

Which brings us to an even stranger discrepancy: Why did you still lose money during April, even though YOU made 85 pips?? The best way to illustrate this is by using an example.

Let’s say that I have two trades on the GBPUSD and one loses 100 pips and the other makes 60 pips, netting me a loss of 40 pips. If my initial stop loss for trade #1 was 200 pips away, and my initial stop loss for trade #2 was 100 pips way what would my position size have been for each trade if I were willing to risk US$500 per trade?

We can easily do the math as follows:

Trade #1: U$500 / 0.0200 = 25,000 units
Trade #2: U$500 / 0.0100 = 50,000 units

Okay, now what would our net result be:

Trade #1: 25,000 x (0.0100) = (U$250)
Trade #2: 50,000 x 0.0060 = U$300

Our net profit = U$50.00 even though we’re net -40 pips. Even though the currency was the same, the pip value was the same, the risked amount was the same, we were still able to achive a net profit DOLLAR-wise compared to our net PIP losses.

It makes you think twice about forex signal services who provide performance statistics PIP based doesn’t it – especially if you trade their services as I have done with Excalibur by RISKING a fixed amount per trade. You’ll want to make sure that if you do employ a money management strategy such as this for a forex signal provider that you not only analyse their performance but also whether their initial stops are always a fixed distance away, or variable.

Anyway, getting back to Excalibur’s Forex I’d like to thank Malcolm for the opportunity and wish him the very best for the future with his service. If I could recommend one thing for his service it would be the capability to have alerts emailed to the user inbox, but that’s about it.

If you have similarly trialled Excalibur Forex and would like to detail your experience please do so below.

EasyForex are looking for someone to provide an honest review of their forex signal service in here.

If you have used EasyForex’s signals and would like to add your comments, please do so by entering them below and clicking on the “Add Comment” button.

Now that I have finished my review of Excalibur Forex, I will try EasyForex’s system as well, and would encourage others to get in contact with EasyForex so that we all can provide a review (as some of us live in different time zones where we would not be able to access their signals in a timely manner – from what I can gather their signals are sent at 0200 GMT and 1300-1800 GMT [go to World Time Zone if you need to know what this corresponds to in your local time]).

I’m also aware from other reviews that I’ve seen around the place that EasyForex has excessive drawdowns – although I also am of the understanding that EasyForex take positions where interest is earned and this can somewhat alleviate the pain of these excessive drawdowns. With this in mind ensure that if you do test this service that you do so with a demo account first.

Recently a comment was made on Currency Secrets by Excalibur Forex offering readers here a free trial of their signal services up until the end of March (see comment here).

There are a couple of things that I like about Excalibur, but there are also a couple of things that I have concerns about.

I’ll quickly go through my concerns: first, their web site is relatively new (something which they made known in their comment – so new in fact that it’s only been in operation for a couple of weeks!), however, while the age of a signal service web site does draw some concern to me it’s the performance chart they have on their web site that concerns me the most. Automatically this throws up a question: are these performance results ACTUAL or HYPOTHETICAL? If the web site had been in existence since the start of their performance figures I may have been led to believe that the performance figures were ACTUAL, but as this isn’t the case it has led me to believe otherwise.

My other concern is the free trial offered. Excalibur make note on their web site that they do not offer a free trial, so I thank them for politely offering one in here, however, I think it would be far more beneficial if Excalibur offered a free trial period over an ENTIRE month rather than just PART of a month. This can help verify our performance against THEIR performance statistics for that month.

Apart from that the things I liked about Excalibur’s approach were:

Firstly, they only place trades once per day (midnight GMT) on the top currency USD pairs including EUR/JPY & GBP/JPY (and each trade includes a stop loss).

Secondly, if they don’t make 200 pips in a month you get the next month free! Something that I haven’t seen too often with signal providers.

So with my concerns I emailed Excalibur and received a reply from Malcolm who mentioned that he had traded forex for the past 6 years and that indeed his performance results are hypothetical and that he would allow a free monthly subscription. I guess we’ll see how it goes.

If any of you have taken up Malcolm’s offer for a free subscription up until the end of March in the mean time I encourage you to add your comments below on how you have found (or are finding) his service.

Thanks to a comment by Don Guy on my second post about ProSignal I thought I would offer an update to ProSignal so as not to deter any future forex traders from my old posts.

As mentioned by Don in his comment it seems Prosignal have taken on board the problems of using backtested performance figures in their reporting and, as per their web site now track their results real time, which means they INCLUDE the cost of the spread incurred in their trading results.

They state,
Back-tested Vs Real-time Past Performance: Since August 1st, 2005 the results listed in the performance table for the EUR/USD, GBP/USD and USD/CHF have occurred under real-time monitoring. Performance numbers prior to July 31st, 2005 were generated by back-testing on historical data. The EUR/JPY, released to the public March 2006, in its current configuration, has been running under real-time monitoring since January 2006. The results prior to January 2006 are generated on historical data.

Equally impressive is the following paragraph on their backtesting results, they state,
Performance Chart Reflects a 50% Profit Reduction in Back-Tested Returns: Back-testing plays a significant role in helping to validate and design profitable automated trading strategies. A back-tested result is a snapshot of what a trading strategy would have produced over a period of historical data. However, due to the benefit of hindsight and optimization, back-tested data often shows more profit than what you may expect in real time. To account for a potential difference between back-tested and real time outcomes, in the performance chart above, we deducted 216 pips from each month of back-tested data on the EUR/USD, 200 pips from each month of back-tested data on the GBP/USD, 225 pips from each month of back-tested data on the USD/CHF and 154 pips from each month of back-tested data on the EUR/JPY.

These deductions equal 50% of the total Net Profits over the period of hypothetical back-testing. Since August 1st, 2005 on the EUR/USD, GBP/USD & USD/CHF the results indicated in the table were produced in real-time and therefore, no deductions were made beyond August 1st, 2005 on those currency pairs. Since January 1st, 2006 on the EUR/JPY the results indicated in the table were produced in real-time and therefore, no deductions were made beyond January 1st, 2006 on the EUR/JPY. Using ProSignal’s charting software you can back-test all of our automated signals against historical data to review signal accuracy.

If this is true then their results are quite impressive and I wouldn’t hesitate recommending forex traders to their service.

Thank you Don for your comments.

Go to Prosignal.

If anyone has any comments on ProSignal that they’d like to add please feel free to add them below.

You may wish to read our latest update on ProSignal.

Today I decided to visit the ProSignal page to see how these guys were going over the last few weeks.

And, sure enough, they have changed a few things (which came as no surprise to me considering they were using indicative data to back-test their system).

Here were some of the changes…

BEFORE:
> They once tracked the EURUSD and the GBPUSD both on the 15 minute chart, and when my paid trial period was over they had just issued out the EURJPY (on the 15 minute) to trade too.

AFTER:
> Now they have dropped the GBPUSD (obviously wasn’t doing well) and are now using the USDCHF on an hourly chart!

BEFORE:
> For the EURUSD & GBPUSD they stated that users should use a 40 pip initial stop loss for new trades (I think this was the same for the EURJPY, but have forgotten).

AFTER:
> Now they have blown this out to 75 pips on the EURUSD, 100 pips on the USDCHF, and 85 pips on the EURJPY!!!

For some strange reason they still claim that the two currencies make 14,000 – which was their initial claim with the EURUSD & GBPUSD currencies (of course it is on indicative data – don’t say you haven’t been warned!).

I don’t know what ProSignal thinks they can accomplish by chopping and changing their rules. Obviously they will try and see how this next round goes and if it fails tweek it some more and do it again.

Now, there’s one thing I must admit amidst all this bagging: their forex education section (which is available to all once you sign up and pay the trial fee) is very good however be sure to check out Forex Television for their great free technical analysis education on the forex market as it is similar.