Analytical Report by Better

A half of the Championship has passed, so now we have enough statistical materials on trades. In this present report, the ability of traders (Expert Advisors) to forecast the market behavior is analyzed. We won't consider specific terms that are different in different brokerage companies (swaps, spreads, gap conditions), as well as money management. So we will focus on only the Expert Advisors' ability to enter and leave the market properly.

For this analysis, we selected trades made by all Participants of the Championship on the most popular currency pair, EURUSD, within 6 weeks. Thus, 12 506 trades (45.8% of all trades of the Championship) have been made on this currency pair during the period under research.

First of all, let's find out about how many pips per trade in average are earned/lost by an average trader due to his or her ability to forecast rises/drops in the rate of EURUSD. We don't consider swaps and standard spread (2 pips). We also allow for some unbalance in broker's gap conditions.

MetaTrader 4 Server gets rather tough with traders: At gaps, stop orders are executed with a slippage, whereas limits are executed at the order price strictly. It means that both alternatives are not to the trader's benefit. In order to eliminate the influence of this unbalance upon traders' abilities, we will consider all trades closed with a slippage as if they were closed at the stop price.

Thus, the further analysis is made in "nearly ideal broker's" conditions - without spreads, swaps, or gap slippages. However, slippages at opening/closing "by market" and short-term expansions of spreads at news remain unconsidered. Unfortunately, these factors cannot be considered here.

We have the following results:

It turns out that there are twice as many profitable trades as losing ones. On the other hand, the average loss is approximately twice as large as the average profit. Expert Advisors seem to prefer quick fixing of profits, but they hold positions for a long time if they start to be losing. This is also confirmed by analysis of trades according to their holding time: 935 minutes for losing trades and 559 for profitable ones.

Having sorted all trades by holding time, we will get in arising the sum of profitable trades and, separately, the sum of losing trades.

Let's also see how the Profit Factor of closed positions changes in time.

As we can see, Expert Advisors start closing profitable positions in bulks within a few minutes, whereas they are in no haste to close losing positions. Profit Factor reaches 4.2 within 3 minutes. Starting with the 5th minute it tends to decrease and falls below 1 in about a day.

Conclusions:

1. Even in "nearly ideal" conditions, Expert Advisors would averagely have losses of about -0.55 pips per trade. If we even consider some slippage at opening/closing "by market", the EAs turn out not to trade better than they would if entering/leaving were generated randomly.
2. Despite of the fact that Expert Advisors, unlike human traders, are not prone to emotions, the developers include their own mental attitudes in their programs. This results in a clear tendency to fix small profits and allow losses to grow.

Interview with Olexandr Topchylo (Better) Olexandr performed unsuccessfully in the last-year Championship, and this failure was the making of him. He learned his lesson and became the leader of Championship 2007 with a huge equity!	Reporting the 8th Week of the Championship (19-25 November) Two thirds of the Championship have already passed. The first places are taken by familiar Participants, however, surprises run on.
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