Why people generally prefer to buy EA instead of managed account service?

Wallace posted:
 ...

From Trader's Viewpoint

From a traders' perspective, I somewhat understand their views. It is natural that people love possession and hate uncertaintly. So, whenever they see a potential EA, they will try to possess it and take full control of it. Also, they will feel secure if they really own the EA.

...

I'm just a beginner forex trader but I never thought before of putting my money into a managed account for two reasons. Firstly is confidence. As a trader you are never sure what the manager will do with your money, and the feeling of having no control at all on what the manager does is terrifying. Second. I guess many people, me included, have little capital to invest so the minimum investment amount required by most managers is difficult for us to reach. However you may buy a cheap EA, as compared to few thousands a manager would ask, hoping the robot will slowly grow your small investment.

Personally, I would try a managed account if I could invest 500 or 1000 euro. This is the biggest amount I can afford to loose. How many managed account allow such a small initial investment? Not many. Then comes the trust issue. I find sites that offer signals from other traders a very good alternative because they let you start with a small capital and you can choose by yourself who is the 'manager' from a large list of traders.

Today more than ever, I'm interested on a managed account because I could get my 1000 euro grown a little bit while I learn how to trade forex.

Aimak

In anwer to the original questions:

Q. If an EA is truly profitable, why would you sell it?

A. Well, for me personally it would be a matter of raising funds to invest it myself, knowing that if I were to sell it to 100 people at $100 each thats $10k for me to use to trade it. Those 100 people who bought it, a good portion would trade it wrong, or simply stop trading it entirely after a few months. There would be no real long term effects negative effects of selling it. Then of course I could make a few minor changes and sell it again as 'new and improved' or 'version 2' or whatever to make a quick buck on the side.

Now, that being said I have an EA that I wrote myself that IS profitable.. but oddly enough I feel there are NO 'real' profitable EA's being sold.. which makes me a hypocrit I guess. But then again, I'm not selling my EA.

Q. Why do people continue to spend money on EA's?

A. A sucker is born every minute! Seriously! It may sound like putting down modern society, but if people didn't fall for scams or sucker sales, then people wouldn't run them. For example, why would someone send you an 'Afrikan Bank Millions' email scam unless people actually fell for that line of bullshit? The same goes for EA selling and buying. People BUY EA's because they want to believe the EA will fix thier trading problems. They want to believe the person selling the EA has more knowledge and experience trading forex then they do, and that they can trust that the EA will bring them some measure of trading success. Just think about it, everything you have ever purchased was purchased because you 'believed' it would fulfull 'Some' need. Painting? You believe it looks good! Gift? you believe it will make reciever happy! Food? You believe it will satisfy your hunger/craving? Drugs? Car? Etc? Everything you bought, was a belief.

Q. Why do people hesitate to try MAS?

A. This is a complicated combination of Ignorance, Lack of Facilities, and Belief. First you have the issue that most people dont even know what FOREX is in the first place. I tell people I am an FOREX trader and they get this blank look on thier face of WTF is that? So then you have 'new' traders entering the market who have just recently discovered FOREX, do they know about MAS? No they dont! Ignorance of its availability as a product is probably the #1 reason people dont do it. Second you have the 'Lack of Facilities', there are very few websights that bring account managers and potential investors together. This leaves the account managers effectively own thier own when it comes to advertiseing thier services to the general public, which is why the majority of them get thier clients through word of mouth. Finally there is 'Belief'. Assuming you overcome the first two obstacles, you are left with convincing people that YOU personally can manage thier money better then they can. You are asking people to believe in you, and frankly people have an easier time believing in an 'EA' then they do believing in other people; especially with all the recent news events about wall street fund managers scamming clients and the huge money lossess. News media has destroyed the publics trust in individual account managers.

Personally I would 'love' to use my skills to manage others accounts for a percentage of the profits, but frankly until someone finds a way to make it 'easy' to set up a managed fund, its just not going to happen. Unless I have somehow missed something obvious over the past 6 years I've been trading? Do any of you know of an easy way to set up a managed fund, advertise it and get clients?

Hi,

they already have such accounts and trust is not a issue at all. I think you were loser to the truth that most people simply do not know what Forex is.
There a a few accounts different names but the same thing one is called PAMM. With this account the client simply opens the account however the broker will make sure that the trader gets paid his commissions while the client has complete control over his account.

I often trade other peoples accounts and I do not even brother with PAMM. I just have the client give me the traders password and trade the account at the end of the month is I don't get my commission check then I stop trading.
I found this simple system to work best. Most people would not cheat a person when they are getting 20-30% per month.
Plus they only get to do it once so it's not really worth it.

As far as the EA thing goes your answer is really the classic answer, well put and true for the most part.
However there is a reason why people sell EAs that work. For example look at my chart it's only a couple of months running my finished EA before that it was in a great deal of live testing. By looking at my account would you say it's a profitable EA?

Now begs the question would I sell it and if I would for how much. the answer is more complicated than you would think.
I know it makes good money, I know it will make good money with whoever uses the EA. would I sell it ? I probably would.
However I have given this no thought and here is the reason and if you always remember this you will always have a healtly attitude when you look for a EA to purchase or another type of Forex trading system.
Ok here it is...It's never just the EA or system. What it is has to do with the excellent blending of both the EA/system and the person using the system. This is why you can have 2 people using the same system one makes money the other one fails.
It's really that simple. EAs are never a set and forget type of deal and when you make them so you will have a great loss or blow your account. They are a tool to use. You see I have my own recovery system if my account gets too high in dd I simply turn off the EA. then anyalize the trades using treand lines, MA, bands etc and I will mannualy trade out my trades for a break even or a small loss. So if I sold my EA for lets say $500 I would actually guarantee that if the trader followed my exact trading rules they would get back their deposit within the first week of trading. However they would need to follow my exact rules. If done and they loss any money in the first week after following my system I would give them back $750 this is how sure I am about this EA and myself.

Why don't I do it well it's a easy question it's true I have a lot of confidence in my EA,I have a lot of confidence in my recovery system(never ever blown a account in 2 years of trading live) what I do n0t have is confidence in people doing exactly as I tell them to do. It's a funny world you can tell a person being face to face that if you do exactly as I say you will make X amount of money. They will look you in the eyes and promise you and even saying things like on my mothers grave I would promise. Then what happens they get into a bit of trouble and they break all my rules, go in and cause severe damage to their account. When asked after the fact why did you not listen to me the typical answer is I did listen to you I figured just a little bit of my own to get out of the trades would not harm anything..
Hence the reason people cannot be honest when it comes down to this for the most part. They just react and throw all my instructions out the windown

So long story short I just gave you the real scoop on all EAs including the ones that are profitable. It's always is a 2 way relationship the EA/system and the user.

Happy trading
Randy

Gibberish posted:
    
Personally I would 'love' to use my skills to manage others accounts for a percentage of the profits, but frankly until someone finds a way to make it 'easy' to set up a managed fund, its just not going to happen. Unless I have somehow missed something obvious over the past 6 years I've been trading? Do any of you know of an easy way to set up a managed fund, advertise it and get clients?

Hello EA developers and Traders,

Interesting topic indeed. I see the popularity in creating a Profitable EA, however, years of live testing would be necessary, thus developers design systems to operate in certain conditions for temporary results, then quickly promote their service by managed accounts or the sale of their EA, indicator, strategy etc. MQL + mt4/5 made such tasks quite easy to learn hence, the large participation in development of automation.

WHY EA and not managed? Simple. $99 is tolerable for most people looking for an easy way for profits, compared to a blown managed account that can eliminate your interest in FX quickly. Either way, there are too many to chose from, Lack of documentation, lack of transparency, and honestly too many promises, loopholes, dishonesty, and egotistical traders/developers. Let the Results be Fully Transparent including Equity (for all those traders with hidden equity with 100%+ balance gains)

We have both seen EA's and managed accounts fail. However, like mentioned before, a managed account is a one time shot, while an EA is a lesson learned but modifications are what keep people coming back for more. It's like the lottery.

We all know that automation is Key, whether fully automated or semi, Ea's can help a day trader, newbie, or profit seekers.

Glad to see so many qualitied replies.

May be another reason people prefer EA (though it is understood that most EAs available in the market are either scam or only work under certain market condition) to managed account service is that they don't like other people to take risk on their capital. (However, if this is true, then the equity market will not exist....)

Also, some may think the arrangement is unfair as the manager trades others' capital to earn risk free profit. However, in return, they will not compensate the traders when losses incurred.

From my point of view, managed account service is something like buying stock in the stock market. The managers present the performance to the traders. Based on the performance, the traders decide whether to invest capital on their services. Of course, no investment is risk free in the world. Past performance also cannot guarantee any future performance (this is the golden rule of all investment products). Provided that the manager is presenting his performance honestly, investors should not blame the managers for any bad performance.

Just like investors buying Microsoft stock because the company's performance is good. They bear their own risk by investing capital to hold their stock. If the market changes and the product of Microsoft is not demanded by the people anymore, investor can't blame the management of Microsoft and request for compensation. The game is fair because people should understand there is risk when making their investment decision.

When someone claims that their EA is profitable and try to sell it, you have to think why he is willing to sell if EA is that profitable? Or if the the EA is really that profitable, how should it be valued? USD100? USD200 or USD2,000?

After being around for a while, you see a lot of garbage EA's on the market for sale. The question does come to mind. Why would the developer sell it if it is truly that great? If I had an EA that would grow an account double every month, I would not breathe a word of it to anyone. The ONLY possibility would be that the developer is selling it so that they can collect enough capital to properly trade it so they can grow their account substantially.

But the same arguement is there for managed accounts. If the system is truly that good, then why would a person assume all that extra work to trade other people's money? I can see it if they are getting a decent cut of profits if the developer does not have a large bank roll behind them, but that would again be the only reason.

I have a considerable amount of capital to trade, but I have found that manual trading myself has outperformed EVERYTHING I have seen out there. I am not allergic to the idea of putting my money in a managed account, and if someone knew of a managed account that has good consistent and high growth, I would LOVE to hear about it. So far what I have seen is VERY little reward for the risk.

powercouple posted:
    After being around for a while, you see a lot of garbage EA's on the market for sale. The question does come to mind. Why would the developer sell it if it is truly that great? If I had an EA that would grow an account double every month, I would not breathe a word of it to anyone. The ONLY possibility would be that the developer is selling it so that they can collect enough capital to properly trade it so they can grow their account substantially.

But the same arguement is there for managed accounts. If the system is truly that good, then why would a person assume all that extra work to trade other people's money? I can see it if they are getting a decent cut of profits if the developer does not have a large bank roll behind them, but that would again be the only reason.

I have a considerable amount of capital to trade, but I have found that manual trading myself has outperformed EVERYTHING I have seen out there. I am not allergic to the idea of putting my money in a managed account, and if someone knew of a managed account that has good consistent and high growth, I would LOVE to hear about it. So far what I have seen is VERY little reward for the risk.

I see nothing on your site what would support your post....

I am new to this site.

I think there is a real need for forex managed account intermediaries.

I'm looking real hard at it. Through all the years I've been battling this beasty I've managed to meet a few excellent traders. But for the most part they can't find the money, as they are traders first and foremost. They're not business people so they're not out there cutting deals. They're trading. Making money from the usual mix, trading, bit of mentoring and attempting to build a client base along the way. And the retail money often don't find them because of all the noise and lack of trust in the retail fx community.

So I think there is space for a third party to provide the trust aspect. Especially with the high water mark managed accounts where a third party won't get paid if he places money with a trader that can't perform. So it is in his interest to place the money with the best trader he can possibly find.

This website is a testament to how systems can be manipulated to look good. 99% of the systems here are not viable. An Inroducing Broker for example has a big incentive to show you a pretty graph and then just churn the account for inside spread. You won't make a cent, but I assure you he is. I can see at a glance if a system is viable or not after years of staring at failing systems, most of the new money can't. I been reading some real horror stories of late. Guys losing thousands and thousands of dollars in managed accounts, with that Zulu website, and that's supposed to be all transparent, just like this one is. Got to know what to look for....

Also different traders have different styles. That needs to be matched to the money.

Unfortunately expectations seems to be a bit high. I got a query the other day, and I said can place you with someone who does about 10% pm with a 3% draw down - the response I got was 'to slow'. Buffet became the second richest man in the world doing about one third of that, but doing 300% more than Buffet is to slow. I sent a follow up explaining that the draw down was the determining factor in performance, not the growth and that at 3% we could probably ask the trader to turn it up a bit, provided the account is big enough to justify the individual attention, still waiting for the reply....performance was simply not understood or the money wasn't enough, guess I'll never know.

My parents are with Alan Gray, one of the best performing funds in the world. Their annual return since 1971 is 17% per annum. They drew down 30% this year. I think 100% per annum with 3% DD is just fine....

Powercouple,

Define high growth. Tell me what you expect from a FX portfolio.

powercouple posted:
    ...and if someone knew of a managed account that has good consistent and high growth, I would LOVE to hear about it. So far what I have seen is VERY little reward for the risk.

I believe our clients are happy with the VTSS managed service and they're making money. About 130 pips per day since starting to track in the beginning of March...

Theo Buitendyk
[email protected]
Volatility Trader Signals Service

Elkart posted:
 ...This website is a testament to how systems can be manipulated to look good. 99% of the systems here are not viable.

Indeed. My observation exactly.

I think to find real money you have to be shaking hands in the right circles. And none of the good traders I know are in those circles.

That leaves the retail investor and there the traders are competing with every con artist out there. If you hold up your 100% at 3% DD it doesn't even get noticed next to Super Pip Bob's 1000%, even if Bob wipes out next month with all your cash...

I would consider anything higher than 15% per month to be high growth.

I know people who can do that, but you'll draw down at that pace, just no way to avoid it...

2 500% in two years, heck of a figure.

None of the guys I know will be able to show you they can do 15%. What they can show you is 10% at 3% DD. One has to surmise they can do 20% at 6% DD then. But they don't trade like that, not on their normal managed accounts anyway.

tbuitendyk posted:
    

powercouple posted:
    ...and if someone knew of a managed account that has good consistent and high growth, I would LOVE to hear about it. So far what I have seen is VERY little reward for the risk.

I believe our clients are happy with the VTSS managed service and they're making money. About 130 pips per day since starting to track in the beginning of March...

Theo Buitendyk
[email protected]
Volatility Trader Signals Service

Theo, you will need to have a record of at least 5 years NOT months. I know as I was quite successful for 10 months last year and then the expert advisors went through a period of DD this year. The expert advisors are picking up again; thus, risk and reward go hand in hand. It is a matter of time that your risk will show up. There are no ways of avoiding it.

So what is the main reason for the questions?

USD5000 is a big amount to 'try' a managed account.

robw135 posted:
    Something that has puzzled me ever since I heard about EAs.
There must have been gazillion variations of EAs developed in the past few years since forex opened up and so far I don't believe any of them works for any considerable period of time (please prove me wrong).

It is known as survavilist-bias, there is not a single EA that will generate a positive return moth after month for an extended period of time (at least 12 months), which is also why the MT4 trading contests don't prove anything, the two month period is to short. Out of hundreds of EA's there will always be one or two making money in this two month time frame, but let the EA run for 12 months and it won't work anymore.