Black Belt EA Logo
Price: $99

Black Belt EA

Added on August 7, 2012 05:26 AM
(4 / 5)
Trading style: opens trades around the clock based on price action
Currency pairs: EURUSD
Time frame: M30
Money-back guarantee: 60-day
NFA compliance: Yes
License: 1 real and 5 demo accounts

On first inspection, the Black Belt EA appears to be a well put together bot that offers a professional approach to forex trading. The bot itself trades EURUSD, the most popular of forex crosses, and is able to capture good sized profits by trading volatility breakouts and retracements. The Black Belt EA uses price action alone to open positions which tends to mean it works irrespective of the broker used. Key to Black Belt’s success is in its position sizing formula that allows it to open up to 16 concurrent positions at any one time.

Method

While 16 open positions at one time may sound like a lot, it is important to understand that having concurrent positions is an important part of the bot’s strategy. Similar to the Forex Growth Bot, extra positions are usually added to once a position is in profit, leveraging the free margin that has been created by the profitable trade. In other words, the bot operates a pyramid technique which adds equal or smaller trades as profit increases. Just to be clear, this is the opposite of a martingale strategy and is an effective strategy in trading forex markets.

This may not suit everyone, and after a number of requests by traders, the makers of the Black Belt EA introduced a feature in which the maximum number of open trades was able to be set by the user. However, while reducing the max number of open position may help traders feel more comfortable with their trading, it does not help the system, which relies on pyramiding techniques to extract big profits from one or two winning trades. It is worth remembering that these settings have been devised over months of testing. However, as is so often the case, the default settings tend to work the best.

One other thing to note about the Black Belt EA is that it opens and closes positions at the beginning of a bar only. In other words, if the system gets a signal it has to wait for the next bar to open or close the trade - which could be as long as 30 minutes (since the EA is designed to trades the 30 minute timeframe only). This isn’t really a problem, in fact in some ways it is a good thing; It shows that the program was probably subject to robust testing techniques during its development. Furthermore, trading on the open is a neat and structured way to go about things which lends more weight to the validity of the back tests.

Other than that, the Black Belt EA operates pretty seamlessly. It uses volatility levels to enter stop losses and to take profit, and there are not too many variables to set on the Black Belt EA, which makes it simple to use.

Past performance

There are three back tests on the BB EA website which showcase the potential of the bot across three different risk settings. As expected, the back test using fixed lots of 0.1 results in the least profit gained ($100,000 over 12 years) but smallest drawdown (5.66%). In comparison, by using auto money management and position sizing set as a percentage of working capital, the EA returned $881,017 with a drawdown of 12.87% over the same period.

The figures are good and the system shows the capability to produce robust equity curves over the long term.

However, by running external Monte Carlo analysis, it was shown that the bot can occasionally encounter drawdowns over quite long periods. In fact, rigorous external tests reveal that it’s possible the bot can enter drawdowns of approaching 20% and stay underwater for as long as three years. Obviously, this will not be acceptable for most traders but it is worth bearing in mind that this is under a worst case scenario basis and is actually a common feature of good, robust systems. Actually, Monte Carlo analysis shows the bot is profitable even during its worst case scenario (over 100,000 iterations). This is encouraging news. It’s therefore important not to bail on the system before it has had a chance to recover from its drawdown. Instead, the system needs to be evaluated periodically so as to check it is still working. If drawdown exceeds 25% or the bot has consecutive losses of 25 or more, then it’s a good sign that the EA has stopped working.

 

2000-2007, MM=false, fixed_lot=0.1

 

2007-2012, MM=false, fixed_lot=0.1

 

2000-2012, MM=false, fixed_lot=0.1

 

2000-2012, MM=true, balance_percent=0.8

 

Future performance

The Black Belt EA can enter drawdowns as shown, yet it is equally true that it often recovers from drawdowns in just a few trades so it’s not all bad. There are also a number of future live tests for the bot, many of which have been verified by myfxbook.com:

Over the last 13 months of trading, the BB EA has made a gain of just 0.2% with a drawdown of 4.93%. Although not great, the bot probably suffered from starting during a bad time for EURUSD. The bot had a pretty bad start and is only really just beginning to recover. Having said that, the bot is quite capable of making up for lost time and may start to post some good gains soon. So maybe it is a good time to buy.

Looking deeper into the verified results, the BB EA shows pretty consistent stats. Expectancy is 1.4 pips (not bad) and profit factor is 1.01. The system also shows a great average win to average loss ratio – average win is 45 pips whilst average loss is -29 pips. Further, the bot operates with a winning percentage of 41% and average trade duration is 16 hours – which is considerably longer than most bots. Come to think of it, the statistics bear a lot of similarities with trend following systems, many of which do very well with the same kind of stats.

Conclusion

The Black Belt EA is not a ‘scam’ product, nor does it require ultra-tight spreads or favorable latency in order to work efficiently.

So far, the EA has underwhelmed in live trading and that should not be ignored. However, this bot definitely does have something going for it. Rigorous statistical tests reveal that the EA is robust and has the potential to make good profits in the future. The worst test over 100,000 Monte Carlo iterations still produced a good profit for the bot, a claim that cannot be said for some other EA’s on the market. It is therefore, at the very least, worth consideration.


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