REAL CASE STUDIO
We now analyze a popular managed account from Forexboys and my personal opinion.
This website is not borned to make review of EA or managed accounts, you can find thousands of these websites on the net. I just take this managed account because:
1- Just to make a real case studio
2- I tested personally in a real account this strategy
3- There are tons of SIMILAR managed accounts and similar strategies.
I think that a manager of a fund should explain well to their customers the strategy involved, the risk associated, if it is manual or automatic and so on. But at least they show something at Myfxbook and this is a good thing.
This is the link of the account I've checked:
This is the situation of the account on 07-30-2014:
(You can click on the picture to enlarge it)
As you can see the equity of the account is at the moment 83.43%.
We do now just a simple calculation:
You have deposited 40.000 $, the account show a profit of 3.500 $; this means that you pay around 1.700$ of performance fee to Forexboys because they ask 50% of the profit as performance fee. The calculation is approximative just to understand the concept; now the equity is 36.300$ and if you subtract the 1.700$ it means that your real equity of the investment is : 34.600$: 5.400$ of LOSS!
This means that even if the account show a good balance in just 3 months you're losing 5.400$ and for me this is too much…excuse my conservative nature!
Investment started in May 2014:
Now talking about the strategy we will see how is working and see what happend on 30 July to understand why happend the drawdown.
When I invested in this fund I immediately realized that the strategy involved a sort of "grid/martingale" system. There isn't an edge behind; as soon I opened the account immediately there where trades.
This sound for me as a red flag because I want to see a selective way to trade and any traders know that correct setups are rare.
Anyway what I've seen checking the strategy was that the philosophy of that strategy that is very common to many others is that " the price usually come back".
So this means that instead put a stop loss, the strategy continue to open new positions contrarian to the main trend. So in this way the loss become bigger and bigger, I don't like this kind of hope trading.
Like in the martingale systems this strategy is continuosly with open positions in the market exposed to the market volatility without any edge that control how the things are going.
This account for istance was with some important open BUY EURUSD positions and even if it's losing and there's an important news at 8:30 AM.
Usually traders close the positions because you can't know the release.
KEEP OPEN BIG POSITIONS WITH AN IMPORTANT NEWS COMING MEANS TAKE A BIG RISK BECAUSE YOU DON'T KNOW THE NEWS IN ADVANCE!
Who will know if the news will be good or not for our BUY position?
Let's see what happend…..
So unfortunately the news has been no good for our position, we can't complain for this because if we trade like a gambler we can't pretend anything more.
Now the reaction of the market, remember, this is a real account, a real strategy and we look how things goes in real time.
So as you can see our position was in a big loss.
The account is the example is not mine, I closed mine when I've seen how it works, to tell you the true I risked 20% of my equity just after few days.
These strategies are very common and I explain why I don't like:
1- There's no edge! In this case they claim to be forex experts but it seems they just put a sort of grid EA in the account. You can buy that kind of robot for just few dollars and so you don't need to pay 50% of your profit for a service like this, but anyway this is just my opinion.
2- This sort of strategy open positions just after you start the EA, they don't care of market, they are based on the concept that price "usually come back".
3- As they claim to limit the loss at 25% if you just take 2 trends in a row you lose 50% of your money. This is the true. Can you accept this?
4- If you're lucky but again we talk of lucky and not about an edge you can gain some money, anyway most of the time you're exposed to the market volatility because you're ALWAYS in the market, contrary my favourite funds are most of the time FLAT and the trade begin when there's a good setup.
5- Basically this kind of strategy works like "Risk 100 to make 10"
So maybe the fund will recover the loss or maybe no, the point is that you're always at the risk of big drawdown.
So this is how the strategy works, and my opinions are just my opinions, it's your choice and your acceptance of risk that will determine if it wise invest in this fund, if you want have a conservative approach, there are funds that have a real edge, they are stable with low drawdown and in the long run much.. much more profitables.
Link of investor of Forexboys:
(Click the picture to zoom)