1. What % per month should it be averaging?
2. How long should it be forward tested?
3. Do you think back tested results are important?
4. What other factors should we look at before buying an EA?
5. Are most commercial EAs hyped?
6. Are you personally doing well using an EA?
Good questions Paul, thanks for asking...
1. Percent / month? I don't think that % / month is really relevant as it's too easy to skew. One can take 500 pips / month and make it turn 40% by over-trading with 1:500 leverage. It's also possible to take 2000 pips / month and make it turn 10% by under-trading too cautiously. In my view what should be measured is pips / month or pips / day on average. This is how I gauge the performance of our Volatility Trader. (See 'Volatility Trader Rel.3c - LIVE-A' discussion...)
2. Forward testing? Depends on the system. A static EA that only supports one trading mechanism should probably be forward tested for weeks or months before going live, but that depends too on one's risk tolerance. That being said, for an EA that is regularly adapted to current market conditions such as our Volatility Trader, forward testing does not really prove much -- market conditions change and the EA is continually being re-modeled to work with current conditions, so all forward testing proves is that the market conditions adaptation is currently good. The best forward test is with cautious use of real money.
3. Backtesting... That's a loaded question. 😉 It depends entirely on how it is being done and for what purpose. It probably also depends on the nature of the automation. For example, VT uses 'backtesting' so to speak as a modelling/programming phase that teaches the engine generally how the market is behaving in the recent past, with enough room for error that the past can be expected to project forward reasonably well enough to make trading decisions. In the case of our EA, modelling (i.e., 'backtesting') is critical to its designed function, and has less to do with generating fancy graphs than it has to do with teaching the pattern detection engine.
4. Considerations on buying an EA... I would probably not buy an EA again in the future, but if I did I would look for tight stops, use of hedging, attention to money management and account preservation, frequency of trading, good support for set-up details, etc. Also, I would want to know why someone would sell a successful EA in the first place. While I cannot really understand why anyone would sell a successful EA, I suppose that it's possible that there are conditions 'out there somewhere' that make selling one's EA the best way to market successful automation. Frankly I don't know. As many people have pointed out in the past, it's hard to imagine a reason to sell a successful EA -- to my mind it is better to just trade it or sell access to signals, managed accounts, etc.
6. Yes. While rolling out and tuning the Volatility Trader over the past couple of months it up 15% since January with very low order sizing. VT Rel.3c is currently doing something like 150 pips per day on average. With the new money management guidelines we expect to see 20% - 30% per month going forward starting in April. Email to VTSS@homeandofficemicro.com if you would like to trade our signals.