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 group.
Now, whatever I'm going to say in the next lines would not matter to people who have heard of Larsen before. Each time a forum participant mentions his name, it's generally followed by a story of ruined accounts, failed refunds and crappy software.

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

Let's start with the basics.

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

More Details:

Don't Go Chasing Waterfalls

The cheesy website promotes the GPS Forex Robot as a true miracle maker. As soon as you apply it to a Metatrader 4 (MT4) account, you will just have to wait for the wonder of 98% winning trades to take place. If that looks too good to be true, that's probably because it is not.

But let's examine the block-buster asserts further. According to Larsen, a reverse strategy allows fast compensation for losses incurred. Say the robot buys EURUSD and suffers a loss. As a result, it will immediately open a reverse trade (market ) -- a strategy called stop-and-reverse. In fact, that's something quite easy to implement in a software -- even by newbies -- so there goes the"genius" of both programmers (Ronald and Antony) accountable for the bot.

The fascinating part about this bot is its approach to improve trade contract sizes. After the EA reverses a trade, it increases steeply the trade contract size -- from 5 to 9 times.

Does this remind you of something? To me, this resembles a Martingale strategy, which is a gambling method, where you begin with a certain bet size, then double it every time you lose and keep doing this until you win, when you return to the first bet size. What's dangerous about this strategy is that it can guarantee specific gains only to gamblers with boundless wealth and there is not any limit on the maximum bet you can make. But if your wealth is limited, which generally is the case with forex trading, or there's a maximum amount you can exchange (again -- the situation with trading), then you may wind up buried under the burden of continuously 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.

Let us explore the backtests to see how the peculiar strategy of GPS Forex Robot works. The trading is with EURUSD, using one-hour (H1) time frame.

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. The comparative drawdown is at 20%, which is an acceptable risk level. Adding to the sequence of positive information, profit trades (89%) outnumber the losing trades (11%). 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 very deep trouble.
The history of transactions is really enlightening, as you may see the odd trading strategy of the robot in action. For instance, on May 27, 2009 there's a heavy loss of $919 after buying 1 lot of EURUSD. The robot immediately reverses the plan and opens a sell trade but with trade contract size of 6.8. This time it's a winner -- there's a profit of $904, but such profitable trades cannot be guaranteed.

Forward evaluations: Cradle of Loss

A true account on, to which the GPS Forex Robot is applied, provides us with additional 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 losses since its launch, even though the growth rate is slowly declining.

A worrying sign is that typical pips per trade are at 4.6, which hints at vulnerability to fluctuations in market behaviour. 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 account with ThinkForex.

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

The curious part is in the background of trades 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 especially heavy losses. For example, following a losing trade (the reduction is $10,230) on June 8, 2012, the robot reverses the plan and increases the trade contract size from 11 lots to 75 lots. In the event the robot had suffered another loss like the preceding one, but with the increased commerce contract size, the whole loss would have shrunk to $71,088.

If you're acquainted with Isaac Asimov's work, you should be aware of the First Law of Robotics -- that is, a robot can't 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 is similar to the Rosemary's baby sleeping in the cradle of loss. You just do not know when the baby will awaken and unleash hell.

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

Know your keywords

Expert advisor (EA) -- An algorithmic trading platform for 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 plan 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. The lower the drawdown percentage, the less riskier the trading
Let's say you start with a balance of $1,000, then make a profit of $1,000, and following that lose $500. Your drawdown will be 25% ($500/ $1000 + $1000 = 0.25 = 25%).

A standard lot Includes 100,000

If you are buying 1 lot EURUSD at 1.3000 for example, you're buying 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 to 1.3351, that is 1 pip. Pips are utilised to quantify price movement, profit and slippage.