Forex Megadroid Review - 18th December 2009

Well, hello again everyone. It seems like a long time since I’ve been on here but I have my reasons, honest!

You see, for the last few months, I have been running two, concurrent, live tests on the Forex bot MegaDroid. This bot has been around for a while now and seems to provoke one of two extremes from users – they either love it or hate it – no middle ground allowed!

The original plan was to run MegaDroid against another bot, however for reasons I’ll get to later, I felt that this way would yield some interesting data not seen elsewhere. The other bot will now feature here in the New Year instead.

Anyway, before I get into the figure-work, I’ll give a quick (ish) run down of what these things do (or at least claim to do)…

There are three basic ways to trade the Forex markets:

1 – Manually

2 – Semi-Auto

3 – Full-Auto

Manual trading requires a rock-solid grounding in chart analysis, making use of indicators – often many combinations of indicators – to give you your entry and exit points. This grounding takes time and effort and many hours need to be spent burning the midnight oil as you develop your own trading strategies. Not for those who shun hard work…

Get Forex Megadroid here…

Semi-Auto trading, uses computer programmes to generate the signals and you manually execute the trades based on those signals. Examples of this would include our earlier test-subject TUFXP and others such as Market Raider Plus. These two are expensive, both in outright purchase price and in monthly data-feed rates. There are also examples such as Pallada EA, Forex Profit Monster/Forex Day Monster and Black Dog, which are also signal generators but come in at a fraction of the price of the first two and which work directly on the MT4 platform available from the majority of brokers at no cost. These can be extremely useful, especially when used in conjunction with that solid technical grounding I was rabbiting on about earlier…

In the Semi-Auto category, you could also add in Signals Services, which are simply the FX equivalent of the horse-racing tipster. There are two I can think of, off the top of my head and both have a good rep, however again, they are hefty, price-wise.

Full-Auto trading is where the bots come in. FX bots have become the holy grail of trading, given that there will always be people out there who want a black-box solution to making money and this has not been lost on the hordes of e-commerce merchants out there. You know all those emails that used to clog up your in-box offering the latest BetFair killer? Wondered why they’re not so prevalent these days? Well, it’s because all those guys have now moved their attention to FX bots, spotting the opportunity for a quick buck…even the webpages have become interchangeable, with one example I’ve seen actually getting the copy of a horse-racing system mixed in with the bot’s blurb. All of this means that you have to tread very carefully if you’re going to try one of these, some have been exposed as simply copies of free indicators, for example.

I would strongly suggest that if you do want to try a bot, you get onto as many FX blog pages or forums, as so much of the legwork on the Good, The Bad and The Ugly will have been done for you already. More importantly, the site for the Forex Peace Army also carries a section devoted to scams.

Another thing to consider with bots is the use of a VPS set up. I would seriously recommend that you go down this road. A VPS is a cloud server, which hosts your bot completely independently of your home computer. You simply log onto the server and run your trading from there. The reasoning behind this is simple. Most, if not all, bots need to be left on and activated for 24hrs, 5 1/2 days a week. MegaDroid is one such bot. Now, maybe it’s just me but I just don’t like the idea of leaving my computers on for that length of time. A colleague initially scoffed at this attitude, until I reminded him that he was the one who took the battery out of his lap-top and runs it only on mains power to avoid the chance of a battery blowing when he’s not there. Hey, just because you’re paranoid, doesn’t mean they’re not out to get you!

VPS set-ups are available with varying oomph from a growing number of companies. Prices range from around $40 a month and upwards and you will have the ability to run multiple platforms on the single server. Again, do your homework before choosing your host, some even offer the ability to pick which country your VPS will be located.

One major point to consider when looking at the claims for bots, is the fact that results obtained from demo accounts will vary – often wildly – from those on live accounts. This is to do with the way that brokers use different servers to host their clients’ demo and live accounts. These servers handle the price data differently amongst other things and as a result, you just can’t, indeed, must not, go on claimed performance if it is based on a demo account. It is also why most respectable developers will now offer a live feed to a live account, so you can see how their product does in the real world.

Bizarrely, it is also true that two seemingly identical bots running two different accounts on the same broker will also come up with completely different results. The size of your account will also effect how your bot works, with some working fine on a small account but wiping out one of a larger size and vice versa. The amount of risk you are willing to take on board is also a huge influence on results. For instance, a well known trick when selling these things is to publish profit figures while failing to mention that trades included potential drawdowns of up to 80% of your account.  It is obviously true that if you have an unlimited account, then pretty much any losing trade will probably eventually turn around and come back into profit. These differences will become clear once you’ve seen the trading results below.

This kind of thing is why the technique of skimming profits has become more usual with bots, offering as it does protection against a total account wipe-out. However, doing this limits your account size and your ability to increase your lot size and hence, to make money.

Many bots also operate using a Martingale strategy, doubling up – and up – on losing positions. Anyone on here who’s been around the block a few times will know off the utter madness of Martingale, so I won’t bang on about it.

The size of the spread on your broker will also have an impact, with some bots not being able to work with anything larger than 5pts.

Oh – and did I mention that some brokers will not accept bots without notification and some will not accept them at all? You will also have to run a broker account. You must run a bot on the MT4 platform and as such, no using spread-betting companies, I’m afraid. Unless, of course you sit and watch the screens all day and copy all the trades the bot does on a demo account or live micro-account onto your main spread-betting account. Kind of defeats the point of having a bot though, doesn’t it?

So…still want a bot?

Ok, just don’t say I didn’t warn you!

Get Forex Megadroid here…

I had intended to do a day-by-day account of the trading activity. Well, let’s just say it would have been a very boring diary! This bot has a distinct aversion to trading. In fact, we initially thought we must have set the thing up incorrectly…but no, it’s simply that, for days at a time, it just never trades! For that reason, you are getting a preview, review and summing-up all in one go!

Two live accounts were set up with the same broker – FXDD – one funded with $200 and the other with $1000, which is probably the kind of level most newbies will be looking at. Below are the results (for those thinking about shadow-trading using the bot, take good note of the times the trades were executed):

$1000 account:

Date          Time of entry     Trade type       Lot size        Pair               Date/Time of close    Trade p/l

10.09.09         22.20                         Buy                      0.06          EurUsd               10.09.09    23.13                 +$6.00

22.09.09         19.59                          Buy                      0.06          EurUsd               22.09.09    20.56                +$4.20

29.09.09         01.36                          Sell                       0.08          EurUsd               29.09.09   02.39                 +$0.80

14.10.09          00.00                         Sell                      0.08           EurUsd              14.10.09    01.36                  +$2.40

15.10.09          01.02                          Sell                       0.08          EurUsd              15.10.09    02.03                 +$4.80

20.10.09         00.01                          Sell                       0.08          EurUsd              20.10.09    01.11                  +$2.40

28.10.09          00.58                         Sell                        0.09          EurUsd             28.10.09    02.00                +$3.60

29.10.09          01.36                          Sell                        0.09          EurUsd             29.10.09    02.52                 +$3.60

Total trades: 8   Total ‘Wins’: 8   Total p/l: +$27.80

$200 account:

Date              Time of entry      Trade type       Lot size    Pair               Date/Time of close              Trade p/l

02.09.09          10.56                         Buy                         0.10           GbpUsd            02.09.09     11.05                    +$13.00

09.09.09          01.56                         Sell                          0.10           EurUsd             09.09.09     03.14                   +8.00

09.09.09          10.28                         Buy                         0.10           GbpUsd            09.09.09     12.09                    +13.00

18.09.09           00.02                       Sell                          0.10            EurUsd            18.09.09      01.08                    +$7.00

23.09.09           11.21                         Buy                         0.10            GbpUsd            23.09.09     11.30                    +$13.00

24.09.09           01.00                       Buy                         0.10            EurUsd             24.09.09      01.23                   +$16.00

29.09.09           01.35                        Sell                          0.10           EurUsd             29.09.09       02.36                   +$1.00

02.10.09           12.02                        Buy                         0.10           EurUsd             02.10.09       12.10                    +$1.00

14.10.09            00.00                      Sell                          0.10           EurUsd             14.10.09        01.36                    +$4.00

14.10.09            17.28                       Buy                          0.10           GbpUsd            14.10.09        18.03                    +$14.00

15.10.09            01.02                       Sell                          0.10           EurUsd              15.10.09        02.03                   +$7.00

15.10.09            06.00                      Sell                          0.10            EurUsd             15.10.09        07.00                   -$3.00

19.10.09            04.00                      Buy                          0.10           EurUsd              19.10.09       09.54                    +$70.00

19.10.09            11.00                       Sell                           0.10           EurUsd              19.10.09       12.00                    +$3.00

20.10.09            00.00                     Sell                           0.10           EurUsd              20.10.09       01.10                    +/-$0.00

20.10.09            21.00                      Buy                          0.10           EurUsd               20.10.09       22.00                   +$8.00

21.10.09             06.00                     Buy                          0.10           EurUsd               21.10.09        16.38                    +$70.00

28.10.09            00.09                      Buy                          0.20          EurUsd               28.10.09        01.02                   +/-$0.00

28.10.09            00.45                      Sell                           0.10           EurUsd              28.10.09         01.50                  +$4.00

28.10.09            14.22                       Buy                          0.10            GbpUsd            28.10.09         15.24                   +$13.00

29.10.09            00.47                     Sell                            0.10           EurUsd             29.10.09          01.58                  +$7.00

29.10.09            01.35                      Sell                            0.10           EurUsd             29.10.09          02.45                  +$1.00

03.11.09            23.31                       Sell                            0.10          EurUsd             04.11.09           00.39                  +$4.00

10.11.09            00.17                      Sell                            0.10          EurUsd             10.11.09            02.17                  +$1.00

12.11.09            00.00                     Sell                             0.10          EurUsd             12.11.09            13.51                   +$4.00

Total trades: 25   Total ‘Wins’: 24   Total p/l: +$279

Time Frame: 1-Hour chart

Pair: EurUsd (This is the recommended currency pair, however, you will notice that there are a couple of trades on the GbpUsd as well – this was purely experimental on our part but I thought you’d like them included as well.)

The first thing you notice, after the shock of seeing an actual trade, is that this bot has a mad, wee mind of it’s own, with it’s own strange logic, as it continuously took trades out way, way too early, trades which should have been left to run using any kind of sane thinking and which defied all attempts to decipher what exactly it was basing its decisions on.

To attempt some kind of summary…should you buy MegaDroid? Well, looking at the figures on the $200 account, it does look attractive, though the figures on the $1000 account are less so, though having said that, the strike-rate is mighty impressive. It would take a bit more legwork, study-wise, I think, before I would commit to a larger account, as I still feel uneasy about bots. However, my personal feelings aside, if you think you can make it fit into your way of trading and are not in too much of a rush to make it to the big-time, maybe it would be worth the look.

As far as the differing results however, that alone would be enough to give me pause.

I should also take the chance to say thanks here to my two colleagues, Allan Gillies and Michael Mackin, who helped in setting up the test. The beers are on me…

If anyone has any specific questions on the test itself or possible maximising settings etc, post a question here and I’ll try to answer them as best I can.

One thing I will be keeping an eye on is a trader I am aware of, who was selling optimum settings for MegaDroid, which had been well received and worked very well but which has hit a sticky patch as the markets went a bit bonkers. He has withdrawn the product from sale just now, with a view to getting it back out there once he’s had a chance to rework his figures. If and when that happens, I’ll let you know and we can have a look-see.

Get Forex Megadroid here…

For now, happy trading!

IMPORTANT FOOTNOTE: I just found out the profit is taxable. Capital gains tax. You are taxed as a trader as you have to use a broker. Spread betting is tax free through a bookie.