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Week 51: Test account down 2.1% for the week. It´s more than just a headline figure.

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As empirical evidence suggests, some of the top-rated systems on zulutrade.com are money loosers in live accounts and zulutrade stats are misleading, to say the least.

Here is an example. A trading system Isunia.

This is what the performance graph shows on Zulutrade.

… and this is what it looks in real-life trading

Of course, there is a disclaimer — the account was not enabled for no limit trades. It was enabled for 3, 9 or 10 max open trades at any time. Still, during the month there are 90 trades executed into the account to make the findings statistically significant. There are no outliers, this is a steady, systematic decline of the account equity.

I removed Isunia from my test account system mix. Also, for the same reason, I removed monte financial and hii as two other smooth performance curve systems. They showed a marginal profit of 1 and 3 pips, but my conclusion was that, due to their style of trading, those systems will fail eventually.

Basically, those systems take risk of 350-400 pips or more per trade to go for the average gain of 15-20 pips, often averaging loss. There is one system I’ve left in the system mix for the test purposes, it’s named fx168fx. I was aware of the fact that the system is not free from the sins of averaging or taking indefinate loss for a limited gain, but it seemed to happen very rarely. However, now it seems that averaging down is systematic.

As an example, I give the current log of the test account.

He keeps buying GBPUSD in what is a strong downtrend.

…. but he keeps booking profits … ok, usually 1 pip at a time, but still profits … at least, before real-life slippage is accounted for …

and it’s consistently profitable …

… no wonder, the system is ranked #2 un zulutrade as at the time of writing …

So, should I be grateful and happily stay as a subscribe to the system. My answer is definate No. I remove it.

His stragegy looks like averaging the loss. It´s like doubling bet after every loosing roulette bet. Eventually, none has sufficient capital to execute the strategy for any substantial period of time. As I´ve heard in London City ¨averaging has killed more people than Hitler¨.

As the stats show, the guy takes more risk in one day (or even a single trade) than he books in profits for the whole month. My bet is that the strategy will fail, eventually.

P.S. As a hindsight, if I remember fen shui meaning of number 168, then it symbolises eternal wealth. For the trader, may be … not for the customer, definately. The guy is Chinese, it´s likely he knows the meaning.

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Written by A.S.

December 18, 2009 at 9:03 pm

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