Forex Killer - does it kill?

If you look for anything on Forex these days, it's hard not to see an ad for Forex Killer. Anything under $100 is an easy buy for me, so I purchased it, but soon after I started looking deeper into the website.


There are a few things that bug me. First, the man you see, and the video that comes up - it's not Andreas Kirchberger. It's an actor. Does this guy look familiar? Mr. Kirchberger is German, not American.


Now, I looked at the proof of his system on his site:




It's impressive, but when I started looking into the trades, a few things jumped out at me. First, he's using a trailing stop, which is "suggested" in the documentation, but never specified as to how or what to set it to. I'm a big believer in systems, and if you're going to post results, then you need to post the entire, actual system. You CAN'T get the results he posts by just following the signals of the software - there needs to be a trailing stop. Look at the second trade. The stop loss is 1.3490, but the exit price is 1.3510. I sent an email to Mr. Kirchberger:

Mr. Kirchberger,

I have contacted support, but they gave me the general guidelines
that are outlined in the software. Can you offer me more
information? Please see my questions here and at the bottom of this
email.

What trailing stop was used to generate the statement ( http://www.forex-killer.com/statement.gif ) on the front page?

The general guidelines you give below for stop loss do not seem
to match what I see in the statement either.

[We recommend to use Stop Loss = 70-100 pips for daily trading (50-90 for hourly) and Take Profit = 120-150 for daily trading (80-100 forhourly) and 10-20 pips for small timeframe. You can also experiment with S/L and T/P.]

Thanks,
Bill
------------------------------------
Bill
I use trailing stop 10-40
depending of the timeframe.
Andy

Again, being a believer in systems, I would like more precise answers (for 30min timeframe, I use a 10pip trailing stop, 1 hour I use a 20pip TS, etc..). However, I must say, I was impressed that I heard from Mr. Kirchberger himself. He is selling something I think he believes in, and you're not out on your ass once you've bought the software.

Second, the risk he takes on is large - quite large. Look at the GBPUSD trade on 4/18/07 - a loss of 11,000 - and it didn't even hit the stop loss! He exited before that - otherwise the loss would have been twice as large. Now, he could have exited using the software, as it tells you that you can exit a position if the software gives you a no position or opposite position. But I can't be sure just looking at the statement.

Since I have a day job, I prefer a daily timeframe, at least until I can make enough money to not have to work. I traded for a week using a demo account and had 1 small winning trade and 5 losing trades. This was 3 months ago. I have decided to go back and try to figure out a better way to trade the software and see if it actually works, and what settings work.

So, for me, the jury is still out on the software. I have found a few other reviews. Apparently the newer version of the software is using neural network for it's programming, and you can run the same numbers twice and get different results. Mr. Kirchberger says they are aware of the problem and are working on it. As a programmer, I can tell you that Neural Nets will have this issue, so I'm not sure it's good for doing things like backtesting, because you won't always get the same results for the same inputs.

And on that subject, his website says "I'm talking about a proven money making method where you generate all of the cash yourself by trading your own money." How can it be proven if he has just changed his algorithm?

Now, all of that said, I still have hope for this software. I like the fact that this is mathematical, and that takes the emotion and interpretation out of it.

Here is a review that expands on some options for using it for trading:
http://www.smarttradingforprofits.com/a-review-of-the-forex-killer-forex-trading-system/

Lies, damn lies! or, Choosing a broker

So, let me tell you the number one thing about Forex - liquidity my ass!

All of the websites tout the "trillion dollar a day liquidity" of the forex market. Sure, when you're on a real exchange, or have an institutional account with a bank. However, most forex brokers play the other side of your trade. So, in order for them to win, you have to lose. Sounds like a conflict of interest, right? You see, all they do is get a quote machine and pass the numbers down to the software they give you. Things like the Metatrader servers (the server side to the client Metatrader) give the broker the ability to set things like spreads, and change prices. So, your money doesn't drift off into the ether of the "forex market" - no, it stays within the confines of their servers and bank account. This is what's known as a "market maker". Now, market makers are part of just about every market - the stock market, for example. These are the companies that buy and sell shares on the market. They create the "liquidity" by being on the other side of the trade. They make their money in the "spread" - or the difference between the bid and ask. However, the stock market makers are highly regulated. The forex market is currently the wild wild west. There are 2 agencies governing these brokers - the CFTC (commodities and futures trading commission) and the NFA (national futures association). However, this is a voluntary association to join. So, forex brokers are under no regulation at this time - mainly because it's sort of an "international" business - since you are dealing with foreign currencies. Now, they also say "no commissions!" Well, this is crap too - they make plenty of money on the "spread". This is the difference between the bid (what people will buy for) and ask (what people will sell for). Brokers can make these whatever they want. It's a built in pain for a trader - they "take" 2,4, sometimes 10 pips - so that if you want to make a profit, you first have to at least cover this spread.

So, what to do? RESEARCH! The first thing to do when considering a broker is to google them for a review - see if there's anything ugly out there. Next, go to the NFA and use their search tool to look up the company. See if there are any actions against them. Also, importantly, look at the "listed principals" (the owners, ceo, etc.). Research these people as well to see if there are any cases against them. Trust me, this will give you peace of mind. I started my Forex adventure with a company called Forex Liquidity. Within 2 months, there was action against them, and their assets (including MY money) are currently frozen. It will be months (maybe 1 or 2 years) before I see my money (or some portion thereof). The customers are low on the totem pole. You can see details here. I don't know if I'll see that money again. I'm glad I didn't move a bunch in there, but it still hurts.

Now, there are other brokers out there called "ECNs" - these are better, if they truly are. ECNs are "electronic communication networks" - but what they try to say is "we just pass your order along". And it will go into a bigger liquidity pool, where there may be several market makers or even other traders waiting to take the other side of your trade. These brokers sometimes charge a commission, or they can also take the spread. These brokers are generally more fair, but I have yet to find one that has decent software for charting and automated trading.

There are some options out there, but do your homework! DO NOT go with a broker who is not registered with the NFA, unless they are a big bank. And watch out - things are never what they seem. Deutsch Bank (huge german bank) got into the action - I thought, "hallelujah!" - until I found out all they did was partner with FXCM. Yes, dbFX is FXCM with DB logos.

Oanda is decent, but they are a market maker. However, they hedge all of their trades (they take a position opposite yours), so this would effectively net to zero (but they still get the spread).