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Does GPS Forex Robot Really Work

Today we focus on a really unusual expert advisor -- the GPS Forex Robot, developed by Mark Larsen and his team.
Now, whatever I'm going to say in the following lines would perhaps not matter to those who have heard of Larsen before. Each time a forum participant mentions his name, it's usually followed by a story of ruined accounts, failed refunds and crappy software.

Still, I believe it's worth exploring this GPS Forex Robot even for the sake of developing a habit of digging deeper into complicated matters -- things that appear bright and shiny on the surface, but are spoiled on the inside.

Let us start with the fundamentals.

The programmers of this GPS Forex Robot (version 2) offer it for sale for $149, and there is a 60-day money back guarantee. Thus far so good -- for this cost, we might expect the expert adviser to match the performance of the Forex Growth Bot, or FGB, which costs $129, and the Forex Invest Bot, or FIB,- $197.

More Details:

The cheesy website promotes the GPS Forex Robot as a true miracle maker. Once you apply it to a Metatrader 4 (MT4) account, you will only have to wait for the wonder of 98% winning trades to take place. If this seems too good to be true, that is probably because it isn't.

But let's examine the block-buster claims further. According to Larsen, a reverse strategy allows fast compensation for losses incurred. Say the robot purchases EURUSD and suffers a loss. Because of this, it will instantly open a reverse trade (market ) -- a strategy known as stop-and-reverse. In fact, that's something quite simple to implement in a software -- even by newbies -- so there goes the"genius" of the two developers (Ronald and Antony) responsible for the bot.

The fascinating part about this bot is its strategy to increase trade contract sizes. When the EA reverses a trade, it raises steeply the trade contract dimensions -- from 5 to 9 times.

Does this remind you of something? To me, this looks like a Martingale strategy, which is a gaming method, in which you begin with a specific bet size, then double it every time you lose and keep doing this until you win, when you return to the original bet size. What's dangerous about this strategy is that it can guarantee specific gains only to gamblers with boundless wealth and there's absolutely no limit on the maximum bet you can make. But if your wealth is limited, which generally is the case with forex trading, or there is a maximum amount you are able to trade (again -- the situation with trading), then you might end up buried under the weight of constantly rising bets without a genuine possibility to return your losses. In simple words, if you lose more than once, your account will most likely fail.

Backtests: Oh, Sweet, Sweet, Martingale!

Let's explore the backtests to see how the peculiar strategy of GPS Forex Robot works. The evaluation is for the period from October 9, 2007 to January 5, 2012.

At a first glance, the picture is rosy, as this incredible robot makes drives a first deposit of $10,000 to a net profit of $100,952. Pay attention, however, the average profit trade ($219) lags behind the average loss trade ($824)! That's troublesome because a series of losses can get you into a really deep trouble.
The history of trades is really enlightening, because you may see the odd trading strategy of the robot in action. For example, on May 27, 2009 there is a heavy loss of $919 after buying 1 lot of EURUSD. The robot immediately reverses the plan and opens a sell trade but with commerce contract size of 6.8. This time it's a winner -- there is a gain of $904, but such lucrative trades cannot be guaranteed.

Forward tests: Cradle of Loss

A real account on, to which the GPS Forex Robot is implemented, provides us with further insight concerning this EA. The trade is with EURUSD and began on May 21, 2012. Since its activation, the account has registered a gain of 153%, which, given the initial deposit of $100,000, represents a whopping sum.

The account hasn't registered one month of declines since its launch, although the growth rate is gradually declining.

A worrying sign is that typical pips per trade are in 4.6, which hints in vulnerability to fluctuations in market behaviour. By contrast, FIB's Synergy FX account appreciates average pips per trade ratio of 13.6, while the ratio stands at 6.6 for FGB's accounts with ThinkForex.

The risk is reduced, however, since drawdown reaches a solid level of 10%, just like that of FIB and much lower (which is very good thing) than the 42% recorded by FGB's account.

The curious part is in the history of trades as once again we experience the stop-and-reverse strategy and the particular version of the Martingale method. The robot applies both methods when there are especially heavy losses. For example, following a losing trade (the loss is $10,230) on June 8, 2012, the robot reverses the strategy and increases the trade contract size from 11 lots to 75 lots. In case the robot had suffered another loss like the previous one, but with the increased commerce contract size, the whole loss would have amounted to $71,088.

If you're familiar with Isaac Asimov's work, you should know the First Law of Robotics -- that is, a robot cannot harm a human being. The GPS Forex Robot clearly violates this law. It may be not harming the dealers, but it's harming their accounts. It is like the Rosemary's baby sleeping in the cradle of reduction. You just don't know when the baby is going to wake up and unleash hell.

The funniest thing is that Mark Larsen seems not to care at all about the strategy used by the GPS Forex Robot. In fact, he's the single person to have rated this EA with five stars, in his own review of this program. Even if that is the way to hell.

Know your keywords

Expert advisor (EA) -- An algorithmic trading system to the MetaTrader system; a trading robot. EA's can either be downloaded at no cost or for a fee, or can be programmed in the MQL programming language.

Backtesting -- Testing a trading strategy on past time periods through a simulation.

Drawdown - A dealer's biggest loss for a certain period of time, expressed either in pips or as a
Percentage of the dealer's profit.
Let's say you start with a balance of $1,000, then make a profit of $1,000, and after that lose $500. Your drawdown will be 25% ($500/ $1000 + $1000 = 0.25 = 25%).

Lot - The standardized contract size of a trading instrument. A standard lot consists of 100,000

If you're buying 1 lot EURUSD in 1.3000 for example, you're purchasing 100,000 Euro for 130,000 US Dollars.

Pip - The fourth digit after the decimal sign of a price quote. For example: if the EUR/USD moves from
1.3350 into 1.3351, that is 1 pip. Pips are utilised to measure price movement, profit and slippage.

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