Does GPS Forex Robot Really Work

Today we focus on a very 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 people who have heard of Larsen before. Every time a forum participant mentions his name, it's usually followed by a narrative of ruined accounts, neglected refunds and crappy software.

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

Let us start with the fundamentals.

The developers of this GPS Forex Robot (variant 2) offer it for sale for $149, and there's a 60-day money back guarantee. Thus far so good -- for this cost, we may 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 real miracle maker. Once you apply it to a Metatrader 4 (MT4) account, you will just have to wait for the wonder of 98% winning trades to happen. If that looks too good to be true, that's probably because it isn't.

But let's examine the block-buster claims further. According to Larsen, a reverse strategy enables rapid compensation for losses incurred. Say the robot purchases EURUSD and suffers a loss. Because of this, it will immediately open a reverse trade (market ) -- a strategy known as stop-and-reverse. Actually, that's something very easy to implement in a software -- even by novices -- so there goes the"genius" of both developers (Ronald and Antony) accountable for the bot.

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

To me, this resembles a Martingale strategy, which is a gaming method, where you start with a certain bet size, then double it every time you lose and keep doing so until you win, when you return to the first bet size. What's dangerous about this strategy is that it can guarantee certain gains only to gamblers with boundless wealth and there is no limit on the maximum bet you can make. However, if your wealth is limited, which generally is the case with forex trading, or there is a maximum amount you can exchange (again -- the situation with trading), then you may wind up buried under the burden of constantly rising bets without an actual possibility to return your losses. That is to say, if you lose more than once, your account will probably fail.

Backtests: Oh, Sweet, Sweet, Martingale!

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

At a first glance, the picture is rosy, as this unbelievable robot makes drives a first deposit of $10,000 to a net profit of $100,952. The relative drawdown is at 20%, which is an acceptable risk level. Pay attention, however, the average profit trade ($219) lags behind the average loss trade ($824)! That's troublesome because a succession of losses can get you into a very deep trouble.
The history of trades is really enlightening, because you may see the odd trading strategy of the robot in action. For instance, 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 dimensions of 6.8. This time it's a winner -- there's a profit of $904, but such profitable trades cannot be guaranteed.

Forward tests: Cradle of Loss

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

The account has not registered one month of declines since its launch, even though the growth rate is gradually declining.

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

The risk is low, however, since drawdown is at a solid level of 10%, the same as that of FIB and much lower (which is good thing) compared to 42% recorded by FGB's account.

The curious part is in the history of transactions as once again we experience the stop-and-reverse strategy and the particular version of the Martingale method. The robot applies both approaches when there are particularly heavy losses. By way of instance, after a losing trade (the reduction is $10,230) on June 8, 2012, the robot reverses the strategy and raises the trade contract size from 11 a lot to 75 lots. In the event the robot had suffered another loss like the previous one, but with the increased commerce contract size, the total loss would have amounted to $71,088.

If you're familiar with Isaac Asimov's work, you ought to 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 traders, but it is harming their accounts. It's similar to the Rosemary's baby sleeping in the cradle of loss. You just don't know when the baby will awaken and unleash hell.

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

Know your keywords

Expert advisor (EA) -- An algorithmic trading platform to the MetaTrader system; a trading robot. EA's can 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 trader's biggest loss for a certain period of time, expressed in pips or as a
Percentage of the dealer's profit.
Let's say you begin with a balance of $1,000, then make a profit of $1,000, and after that lose $500.

Lot - The standardized contract size of a trading tool. A standard lot consists of 100,000
Currency units, a mini lot -- of 10,000; a micro lot -- of 1,000 units, and a nano lot -- of 100 units.
If you are buying 1 lot EURUSD in 1.3000 for example, you are purchasing 100,000 Euro for 130,000 US Dollars.

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