Autotrading performs better

Does Forex autotrading perform better?

Is it better to trade by yourself or through a robot, expert advisors and so on? These questions are very easy to find in forex markets nowadays, as an increasing number of financial institutions rely on automated trading. This phenomeno is widespreading also to retail clients, with many sites which offer trading signals.

In a recent paper named ‘Providing Empirical Evidence from Forex Autotrading to Contradict the Efficient Market Hypothesis’, professor Antonio Alonso-Gonzalez (El Bosque University) tries to find an answer to these questions. He compared results from an automated operational strategy (or autotrading robot) with results from other financial products. The goal is to analyze the performance of this robot.

 

To this end, he optimized and evaluated an autotrading robot based on differences in signals of moving average convergence divergence (MACD). He applied this technique to six major currency pairs (AUD/USD, EUR/USD, GBP/USD, USD/CAD, USD/CHF, and USD/JPY), expoiting a one-hour timeframe. He performed the analysis for an optimization period (2001–2008) and testing period (2008 to late August 2011), obtaining satisfactory results for all currency pairs. In addition, to evaluate the autotrading robot’s performance, he compared results for all currency pairs with those of other homogeneous financial products, namely exchange-traded funds (ETFs).

 

The evidence is clear: returns from the autotrading robot for four currency pairs were considerably better than those generated by ETFs. Results from the autotrading robot were always positive for all currency pairs. In contrast, ETFs yielded negative returns in some cases. Findings also provide empirical evidence contradicting the efficient market hypothesis.

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