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

Wallace
Apr 16 2010 at 03:36
86 posts
Dear all,

Recently, I have come across an interesting observation. I am currently testing some EAs and have been approached by traders expressing interest on my works. In fact, I don't plan to sell any EA. For private EA, I am only interested to offer them through managed account service (MAS). Most of the traders have hesitation or express no interest on (MAS). This phenomenon makes me feel interested. I set up this thread and would like to invite both traders and EA developers to share their views.

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.

From EA Developers' Viewpoint

There must be a purpose for people to do a thing. Normally, if peolple spend a lot of effort to develop an EA which is truly profitable, he will not share or sell it unless:

1/ there is a need for quick cash or the offered price is so attractive, he wants to realise the gain now rather than taking risk to trade the EA
2/ he is generous
3/ he just want to show off programming skill

Provided that decompilation of EA is very easy and common nowaday, it doesn't make sense for EA developer to take risk in selling or sharing a profitable EA. The most sensible way for the developers to make long run profit is to provide managed account services through PAMM or MAM platform.

Questions:

As we all know, most commercial EAs selling in the Internet are not work. That explains a fact that truly profitable EA is seldom sold to public. Most of the commercial EAs only show an optimized backtest result or live demo result attracting people to buy. The selling prices are uaually ranged between USD100 to USD300. Here are my questions:

1. If an EA is truly profitable (as what the seller havs claimed on his website), why he wants to sell it at a low price?

2. Demand driven supply. There are still ton of new commercial EAs launch everyday implying that there is still a market. Why people still continue to spend money on these commercial EAs?

3. Why people hesitate to try managed account services (MAS) despite it is the most logical form of co-operation between EA developers and traders? If we ask ourselves what is the initial motiviation to engage in forex trading, most of us should be 'making profit'. It is that simple. How to make profit is not the most important concern. Ironically, depsite most of the MAS providers provide live trading result for proof, people are still hesitate to try. Instead, they will continue to risk their money in buying and trading with commercial EAs or free EAs shared on the Internet. However, it is a fact that most of them are not profitable or still under development.
   
I would like to invite both traders and EA developers to share their view on the above questions.

Kind regards,

Wallace

  

Wallace Forex Laboratory conducts research on profitable EAs. Our ultimate goal is to create a portfolio of EAs which can provide consistent profit.
Daily Forex Trades (dailyforextrades)
Apr 16 2010 at 04:43
11 posts
I have been intrigued with this same issue. I run 2 live account 1 with commercial EA, which went and down like seasaw and is not profitable. Other account is with my own EA, which gives around 15%-20% a month return, it is live online. Everyone wants to buy it for couple of hundred bucks. Why would I sell it so cheap ?

Casey Lim (bestforexea)
Apr 16 2010 at 07:21
75 posts
Yes mighty interesting topic indeed.

I have done both... and here is my personal experiences. As a trader it is much for fun to put the 'robot' to work and 'toy' with it. If it does not work it does not mean it is broken. It's just that it was not used properly.

As a trader, putting money into manage account does not allow me to do anything other than watch and see. No fun. No control.

It's like a remote car... It is much more fun driving the little bugger than seeing another person having that fun.

But hey... that is just me.

Furthermore, most traders does not have $5000 or rather $10,000 to begin with a manage account. Trading EA gives them not only control but also a minimum entry deposit to toy around with forex. And like all human being... most of them feel like superman and trying to be a hero and suddenly overtrade their account because they wanted to achieve the sort of results as displayed by the developer.

Bad mistake if you ask me... I know... Because I tried being a Superman before... and I know believe I can't fly 😄

Most 'superduper' EA are just plain marketing hype... Sell on Senses as the marketing world would say...

Sorry... I digressed.

Manage account requires heavy or higher minimum deposit. And I believe not many people or retail forex trader has that sort of money. Most manage account managers I come across or read about in forums go on word of mouth referral. Friends of friends kind of referral and not over the internet sort of referrals.

And these sort of referrals are people who have deep pockets.

On top of that, there is a general bad stigma about doing biz over the internet for manage account... While they don't mind separating themselves with their $99 bucks over some hyped up site, they are however more reluctant to put up $10k for someone to manage. Even though... their money is relatively save with the broker.

It's just my opinion actually.

But for me... it's the fun and control part... that is why I don't think I re-try manage account again in the near future. Maybe when I have more $10 to risk then maybe I will... until then... it's toying with EA for me.

Wallace
Apr 16 2010 at 08:37
86 posts
Hi Casey,

Thanks for your comment. It is actually a very interesting and good feedback.

In my opinion, most of the traders spending their money on commercial EAs might have been confused on why they engage in forex trading. For me, from the outset, my sole purpose to trade forex is to make profit and try to earn a living from forex trade. However, when I bought my first commercial EA, I become addicted to it and spent a lot of money to buy and test them. Frankly, most of them doesn't work. I later realise that I am indeed 'playing' forex not 'trading' forex.

I start to learn coding EA now because I don't believe in commercial EA anymore. I think people should re-think why they engage in forex trading. If you're serious in making money but not interested in developing EA, then they should save their money to invest in managed accounts rather than buying those USD99 EA.




Wallace Forex Laboratory conducts research on profitable EAs. Our ultimate goal is to create a portfolio of EAs which can provide consistent profit.
Robert
robw135
Apr 17 2010 at 00:53
140 posts
Something that has puzzled me ever since I heard about EAs.

Never used them myself, don't believe in them, probably never will.

Just keep hearing about a new one from every corner, its like people are deaf to what is happening around them.

Please wake up!

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).
Its only my belief that the only ones that may seem to work probably require constant attention and adjustment and if so what is the point of it anyway.
People waste months and years of their life trying to develop that holy grail EA instead of learning to trade themselves. If it fails and 99.9% of the time it doe, they just try to develop another one still learning nothing about trading and with lack of such knowledge any EA is doomed to failure.

Same thing for the buyers of EAs, they think that will eventually find a money printing press - please listen carefully: There is only one and it belongs to the FED.

I think this EA phenomenon has something to do with willingness/ability to learn, by buying the EA the buyer does not need to put forward the effort to learn how the market and economy works and only how to adjust the settings and if it does not work they just buy another one and on and on without the need to learn anything without any pain. The cheaper they are the better the more they can go through.

On the other hand manual trading requires constant learning, thinking and understanding of economic and political concepts, it requires time and dedication. Its just like any other business and in order for it to flourish you have to invest some sweat into it.
 
Unfortunately I see much more people looking for the EAs then for knowledge and therefore I'm not surprised we have 95% failure rate and its probably even higher then that.

Its a market driven in great part by emotions of fear and greed and hope and you cannot automate those.

On the positive side all this buying/selling of EAs must be helping the economy at least a bit so please keep doing whatever you like, I really don't care. Just writing this so maybe someone will wake up, even if its just one person.


Good Trading

kennyhubbard (compuforexpamm)
Apr 17 2010 at 05:47
265 posts

robw135 posted:
Never used them myself, don't believe in them, probably never will.


Everyone has the right to express their opinion, but by your own admission, you have zero experience with EA's, so what makes you feel your opnion carries any weight😕

This is not directed at you personally, unfortunately, your comments are symtomatic of the naivety that permeates automated trading fueled by lack of knowledge and understanding of automation.

I am pretty confident that manual trading strategies have the same dismal failure rate as many EA's but when a manual strategy fails, it is the trader who has failed, whereas if an EA fails, it is empirical, the EA has failed.




Wealth Creation Through Technology
Thulfaqar A Ayyad (thulfaqar)
Apr 17 2010 at 10:27
20 posts
Whether it's EA or Mannual at the end it's your own money dude, control risk and play safe you will reach your limits use compound mathematical equation to lead you to where you wanna reach with your goal, just money managment and profitable small trades will do magic.

I know you all are experienced but some time reminding is not bad to 😝

To reach a great height a person needs to have great depth
Robert
robw135
Apr 17 2010 at 13:38
140 posts

compuforexpamm posted:
    


Everyone has the right to express their opinion, but by your own admission, you have zero experience with EA's, so what makes you feel your opnion carries any weight😕


Your whole response is based on my first two lines, while the point of my posting is in its entirety.
Just proves my point that people always take the easy/painless way. your response was probably aimed at starting some pointless argument but I'm not going that route.
I said what I wanted to say, take it as you like it.
THE END

pc8multifx (pc8multifx)
Apr 17 2010 at 14:34
879 posts

robw135 posted:
    
compuforexpamm posted:
    


Everyone has the right to express their opinion, but by your own admission, you have zero experience with EA's, so what makes you feel your opnion carries any weight😕


Your whole response is based on my first two lines, while the point of my posting is in its entirety.
Just proves my point that people always take the easy/painless way. your response was probably aimed at starting some pointless argument but I'm not going that route.
I said what I wanted to say, take it as you like it.
THE END


I agree on most of what u wrote on your first post. Only on one point I see it the other way around. To get rid of the emotions, which kills you on the long run, to trade with (self developed) robots is the way to go for many seasoned traders to prevent hart attacks after some years of manual trading... especially when they are old furts (like me) 😀

Casey Lim (bestforexea)
Apr 17 2010 at 15:05
75 posts
Hmm.... interesting debate....

Let see if I can contribute....

I agree with Thulfaqar... whether manual or automatic trading (EA) it's a matter of money management.

Manual trading or automatic trading... what is so different between them?

Manual trading...
1. Have a trading plan
2. Follow the plan

Within the plan... you have money management, strategy, system, charting, entry and exit and trading time.

Automatic trading...
1. Have an EA
2. Just click 'Enable Expert'

Within the expert... you have money management, strategy, system, charting, entry and exit and trading time.

While manual trading, one needs to click the button to either buy or sell... Automatic trading... well.... it's automatic.

So EA = Trading plan and trading plan = EA.

How many times has a trader change it's trading plan? How many times has a trader change it's EA? Well... my best guestimate is that an average manual trader change it's trading plan... so does an average automatic trader changes an EA.

Most if not all manual trader learns a system and adapt a trading system from somebody... most if not all automatic trader learns a system and use an EA from somebody...

So Robert... I do not think that there is much of a differences between manual trading and automatic trading or using an EA.

Like any newbie manual trader... they believe that forex is the way to 'print money' and technology magnifies these desire to find the holy grail with the invention of EA.

As you quite rightly put it... ppl are looking for their cashcow... So... these ppl needs to pay their tuition fee... by buying ea after ea and understand that an EA is just a trading plan... Thus, I disagree with Robert on the notion that automatic traders or trading with an EA does not require learning. And that trading EA does not require effort and sweat.

Those people who believes that trading EA does not require effort and sweat deserve to lose their money.

Gurus of all gurus says that trading plan is just 5% of being a successful trader... so that is how arbitrarily the figure 95% people will fail... they only have a trading plan... or an ea... Thus even trading with an EA... one still requires another 95% of stuff that needs to be done or perfected before one can become a completely successful trader.

Well... there are many books on that for manual traders... there are none for automatic traders which I believe that these 95% thingy.... is different between manual and automatic.

As to whether EA is doom to fail? Well... if there is ever a book that I would suggest one to read is the book call the Tipping Point by Malcolm Gladwell.... EA will not fail... the only thing is that... with time and technology... it might be bound to be replace. Just as how Forex EA that are sold on the internet has replaced Forex System strategies that were sold before on the internet. While it is still being sold... I do not think that the reception is as great as Forex EA.




kennyhubbard (compuforexpamm)
Apr 17 2010 at 16:33
265 posts
robw135 posted:
Your whole response is based on my first two lines, while the point of my posting is in its entirety.
Just proves my point that people always take the easy/painless way. your response was probably aimed at starting some pointless argument but I'm not going that route.
I said what I wanted to say, take it as you like it.
THE END


Actually, you started the pointless argument by stating that EA traders are too lazy or too stupid to trade manually......I responded by pointing out that you are not alone in your ignorance. Many experienced traders think like you do. Its unfortunate, and yes, I do stand up for automation. If that makes me argumentative, then so be it.

Sure, I took the lazy way out with your post......but only because its 90% drivel.

The only valid point you make is that there are many many EA's out there with new one's every day. Most of them will fail.....I say the same applies to manual systems, so what is your point?

The only other thing that you said that may carry any weight was :-

robw135 posted:
On the other hand manual trading requires constant learning, thinking and understanding of economic and political concepts, it requires time and dedication. Its just like any other business and in order for it to flourish you have to invest some sweat into it.


This would be a true statement, EXCEPT, you started your sentence with 'On the other hand' which implies that EA traders do not understand anything or do not have to invest any sweat into it, which is absolute nonsense.

I have spent 18 months learning about automated trading and the markets. I consider myself an infant at this stage because there is so much I do not know.....like where Metatrader gets its data from for backtesting and how it treats it. I spend far more time in front of my computer than most manual traders, in the pursuit of knowledge......and then you come along, Mr 'I have never used an EA before' and give us your expert opinion that EA traders are lazy/stupid bunch.......yeah, you could say I want to argue that point.


Wealth Creation Through Technology
Wallace
Apr 18 2010 at 05:10
86 posts
Hello all,

Thanks for your input and argument.

I still believe that it is possible for people to earn profit from programmed trading. Below are my viewpoints:

1. Commercial EAs claiming themselves profitable are not profitable unless they can show LIVE REAL trading result for proof

2. Forward test is the only way to verify performance of an EA. Backtest can only provide limited insight and is often unreliable due to over-optimization
 
3. EAs works on demo account may not work on real account

4. It may not possible to find an EA which can be profitable in all market conditions. However, it may be possible to create a portfolio consists of EAs with different strategies that can generate consistent profit in the long run as a whole
 
5 Truly profitable EAs are seldom sold to/share with the public. Managed account service is the best and the most sensible way for sharing

In my opinion, people should re-ask themselves, what are their initial purposes for trading forex. I see that most people trading EA today is indeed playing forex rather than trading it.

Let's think it in a logicial way. A money printing machine is very valuable and does not need to do any marketing. The only thing the owner should do is to prove that it is a real money printing machine and that is. Once it is proved, people will rush in showing their interest to buy. If you're the owner of that machine, are you willing to sell it? If you are rich enough, you may not want to sell it. However, if you need money to pay the cost for running the machine, you may need to cooperate with other people. In all cases, you still should not sell that machine. They only way that you should do is raising fund and share return with your sponsors. This is the only way to protect an asset while still can benefit both parties.

Applying the above to the EA industry, we will see how strange it is. Like what Donna and other fellow members discussed in other thread, people has added some entertainment factor when trading with EA. Despite they know that EA selling in the market are 99% crap, they still buy them and trade them when there is new EA launched. They don't like managed account service (MAS) because it is boring and uncertain to have other managing your fund....However, forex auotrade itself is a boring stuff. Even you got the system on hand, you still have to let it run by itself.

I believe that the law of finance is applied here. The most fair way to valuate an asset is to discount the future cashflow it is able to generate in its useful life. If an EA is selling for USD99 or USD2XX sth, it implied that it is not very valuable. May be the money you pay is just for entertainment (just like we buy a gaming software) not for its ability to generate cash. Unless you develop you own EA, the most possible way you can find a truly profitable EA is from managed account not from commercial EA.
 
Kind regards,

Wallace

Wallace Forex Laboratory conducts research on profitable EAs. Our ultimate goal is to create a portfolio of EAs which can provide consistent profit.
kevin (spike38)
Apr 19 2010 at 01:26
3 posts
Wallace

I believe your observations are very accurate.

I trade my main account manually (one of Jacko's Turtles), But I'm still very interested in EA's. And have been very involved in there development. In the past year or so, I have released several EA's on another site. Many of which have been very profitable,Including Stoch Power Hedger, Which you can find several examples of on this site. But after having my work stolen,And marketed by several other sites. (FX Equity Builder for example) I have not released any new free EA's. But the idea of a PAMM site, Is very appealing to me. My latest EA is one of my best yet. And at least that way I could protect it.

I have enjoyed this topic. Keep up the discussion

Spike😀

Elkart
Elkart
Apr 19 2010 at 03:57
941 posts
Not getting a managed account very early in my fx attempts was probably a very big and expensive mistake. Should have done it ages ago...

There's no guarantee for a starter that they'll ever succeed and it mostly takes years to get it. It can serve as an insurance to your own performance, provided you can find the right manager. Which is another story entirely.

On this website, and other similar ones like the Zulu people, so far I've seen 1 person I'll take a chance on, where you can see he knows what his doing, talks the right talk and has a decent performance....

SIM
pip2cash
Apr 19 2010 at 07:19
423 posts
Interesting discussion.

EA or Manual?

For me i am using EA. Why?

Simply because i have no time to trade manually, i am not a quick decision maker, i am not a plan follower, I am not dare to open a position(stress if it is a mistake act), i am an emotion follower.

EA manage to over come all of my weaknesses.

Manage account? I have no confidence to the account manager. Last few months he was good but what about next few months? He has the trading skill but what happen if he run away with my money? For the last one year he had not ran away does not mean he will stay for the next year.

Dont shoot me, just my opinion.

SIM

kennyhubbard (compuforexpamm)
Apr 19 2010 at 07:33
265 posts
SIM,

Ironically, my first experience ever was with a managed fund, which turned out to be a massive ponzi scheme. $10 000 out the window, although court cases are pending and we are going to nail the bastards.

Admittedly I have only myself to blame, but I did go based on the fact that one of my coleagues at work was one of the main traders. I guess scoundrels come in all forms and even your friends can run with your money.

I have subsequently learnt that if the account is not done via a PAMM system, then stay away......the facilities exist, so there is no good reason not to use them.


Wealth Creation Through Technology
SIM
pip2cash
Apr 19 2010 at 08:00
423 posts
yes, PAMM is more reliable to avoid the manager being run away.

My opinion, when someone trade using other people money, he will trade less conservative if compare to his own money even thought he has a good plan. This is extremely true if he is not a prof account manager. So i will feel that someone is 'gambling' using my money as capital. If he lose he does not need to responsible but if he win he will make profits. (Some account manager will charge me even he make no profit) With this concept in his mind what do you think he will do with my money?

Again, please dont shoot me, just my opinion.

God bless!

SIM

kennyhubbard (compuforexpamm)
Apr 19 2010 at 10:19
265 posts
SIM,

No one is going to shoot you, so relax dude.......you clearly have funds invested with a fund manager, so you know something about the topic and your input is welcome.

I can't speak for other people but I find that I tend to be more conservative other people's money than with mine. I know and understand when I take a risk.......clients don't understand this risk and they don't thank you for it.

I have been in the unfortunate position where I had to phone clients and tell them that 95% of their account was gone....blown! Its a long story and its was due to a serious defect in the Broker's PAMM system. I managed to get the problem rectified and we eventually ended up about 13% down after the refund......but the broker could just as easily have gone the other way. Just read your broker's terms and conditions if you have any doubt about who pays the price if there is a software malfunction.

Anyway my point is, the pain I felt at losing my money that was invested in the same account was nothing compared to having to deal with upset clients who simply did not understand. This is something that I will not go through again and accordingly my clients get traded more conservatively than my own funds.

Unfortunately I guess some fund managers fail to look long term and possibly that is why they take some of the risks they do. I would suggest that the single best indicator of success here is time, time and more time.

About managers not being responsible for losses but will make money of he wins.........this is 100% true......however, it applies to all funds, including mutual funds. I could show my provident fund as a good example. in 2008 it lost 44% of its value and yet the managers still got paid😡. I am sure Elkart will tell you the same about Macro funds😇


Wealth Creation Through Technology
T. Buitendyk (tbuitendyk)
Apr 20 2010 at 06:14
141 posts
Wallace posted:
... Here are my questions:

1. If an EA is truly profitable (as what the seller havs claimed on his website), why he wants to sell it at a low price?

2. Demand driven supply. There are still ton of new commercial EAs launch everyday implying that there is still a market. Why people still continue to spend money on these commercial EAs?

3. Why people hesitate to try managed account services (MAS) despite it is the most logical form of co-operation between EA developers and traders? If we ask ourselves what is the initial motiviation to engage in forex trading, most of us should be 'making profit'. It is that simple. How to make profit is not the most important concern. Ironically, depsite most of the MAS providers provide live trading result for proof, people are still hesitate to try. Instead, they will continue to risk their money in buying and trading with commercial EAs or free EAs shared on the Internet. However, it is a fact that most of them are not profitable or still under development.


1. Does not make any sense to me. It's conceivable there are circumstances I don't understand that would motivate an EA coder to sell instead of just trade or manage, but I don't know why. My gut instinct tells me that cheap EAs must (almost?) always be a scam, and expensive EAs are probably not much better.

2. People spend money on EAs because they believe that money will fix their lives and that free money is just around the corner. It's just a matter of finding the 'right' EA...

3. Perhaps if people don't want the managed services it is because there is a problem with the marketing of such services. If people see transparency and honesty from the service provider, combined with good intent and a history of live account success, then perhaps they will be more interested in the managed services. In my experience people are more interested in a fully automated managed approach than having to deal with technical issues themselves, such as might be experienced with having to run one's own EA on one's own equipment.


Gear on the left...
Wallace
Apr 22 2010 at 13:35
86 posts
Hi T.Buitendyk,

Thanks for your comments. I think the market is always true.....most commercial EAs are selling for just USD9x or USD1XX sth. If deducting the affiliate commission, the sellers even earn lessor.....it is already a hint that the EA is not working as good as what they claim.

When I first learnt to trade with EA, I also spent a lot of money to buy them. Unfortunately, only a few of them works (e.g. Megadriod). There only two ways that traders should do:

1. Study trading and learn to create their own systems;
2. Let professional to manage their fund.

The major problem is most people doesn't want to spend time on the first option but want to have full control on the trading system. In fact, some broker firms is offering PAMM services which allows traders to see verified real trading result of money manager. It is much more secured than spending money to buy EAs which only show you some videos, pictures or backtest result 😁.

Regards,

Wallace

Wallace Forex Laboratory conducts research on profitable EAs. Our ultimate goal is to create a portfolio of EAs which can provide consistent profit.
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