Before you purchase a Forex automated solution, you need to obtain confirmation that it really does work and produces the results claimed by its advertising hype. One of the main methods that sellers use to achieve this task is to publish results and diagrams based on back-testing.
Although this information may look impressive at first sight, you must understand that it is useless and very misleading unless you can verify its main findings yourself. In fact, all proof items should ideally be presented in such a way that you can confirm their validity easily and simply.
Unfortunately, this is rarely the case because sellers normally only release evidence promoting the virtues of their products. For instance, you could read in the advertising literature that the product in question has been thoroughly tested over periods of months, if not years. However, you may only be able to view a small fraction of this process usually in the form of a few trading snapshots and portions of bank statements.
For the business of serious verification, this information is almost useless as it only represents less than a couple of percent of all the transactions that took place over the entire trading period. In addition, back-testing relies on historical data and you will find that you could have great difficulty understanding exactly what is going on. In particular, as you cannot relate to this information, you may not be able to deduce how well the expert advisor performed over the specified period.
Back-testing can be a valuable testing procedure, but it has limitations during selling unless the entire process is presented in such a format that potential buyers can readily verify its findings. This technique can also be manipulated by unscrupulous sellers targeting just the successful features of their products. Here are a few questions that you should always ask.
Can you correlate the trading events shown on the snapshots to any figures on the bank statements? For instance, if a snapshot illustrates the robot detecting and activating a new buying opportunity, then you should be able to find a new corresponding transaction activated on the bank balance.
Do the sellers calculate key performance parameters using the proof data such as the win to loss ratio and the expectancy value of their products? Do they provide an audit trail so that you can readily confirm their evaluations?
You must realize that to date nearly all the Forex automated robots that have been released on the markets have failed to live up to their advertising hype.
Consequently, this is why you will find very little professional proof elements provided because most of these products simply do not work. You should not think that this is a complex process because it is not.
If an automated solution really does work, then it is not a great hardship to display its performance records so that potential buyers can readily verify them. In fact, this action would be a terrific marketing technique