Today we will start the first article in a series of posts focused on reviewing free expert advisors and analyzing their trading results over the last several years. We will backtest each one of these systems on high quality M1 history data just like we do for The Fade Machine and The Trend Machine

Linear Weighted Moving Average Crossover EA

Today’s EA is called the Linear Weighted Moving Average Crossover EA. You can download this free expert advisor here provided by FXCM.

Trade System Setup:

The Linear Weighted Moving Average Crossover EA trades long and short based upon 2 linear weighted moving averages crossing over each other. When the fast linear weighted moving average moves above the slow linear weighted moving average the strategy buys. When the fast linear weighted moving average moves below the slow linear weighted moving average it sells.

The strategy is only in the market based upon 1 signal at a time. The strategy is designed to trigger and only be in the market part of the time. There are adjustable stops and limits that you may set to control your exits.

Expert Advisor Backtest Results:

Backtest 1
The first backtest was performed on the EUR/USD 15 minute time frame from 2002 to 2009 with the default settings. As you can see, the results produced a steadily down-sloping equity curve with a negative net profit of -$5753.22 and a profit factor of 0.87. The complete Strategy Tester Report can be seen here.

(EUR/USD 15 minute time frame from 2002 to 2009 – default settings)

Backtest 2
Because the results were so bad on the 15M time frame, we decided it was not worth while trying to optimize on that time frame. Instead, we decided to try a larger time frame, H1, to see if we could increase the percentage of profitable trades. Unfortunately, the results were not much better. Net profit was negative again at -$3086.67 with a profit factor of 0.87. The complete Strategy Tester Report can be seen here.

(EUR/USD 1 Hour time frame from 2002 to 2009 – default settings)

Backtest 3
For this backtest we moved up to a longer time frame again, the 4 Hour. The results were a little better, but still negative. Net profit was -$544.31 with a profit factor of 0.93. Because the results are more horizontal here, we decided to optimize at this 4H time frame. The complete Strategy Tester Report can be seen here.

(EUR/USD 4 Hour time frame from 2002 to 2009 – default settings)

Optimization
We decided to optimize on the 4H time frame. Here are the ranges we chose to optimize for, with a Start value, Step through increment, and Stop value.

StopLoss: 30, 30, 90
TakeProfit: 50, 100, 250

Optimization Results
Okay, Here are the top optimization results.

1. StopLoss 60, TakeProfit 250
Profit: $1547
Total Trades: 234
Profit Factor: 1.14
Drawdown: $1558
Drawdown %: 1.55

2. StopLoss 30, TakeProfit 250
Profit: $508
Total Trades: 280
Profit Factor: 1.07
Drawdown: $1192
Drawdown %: 1.18

3. StopLoss 30, TakeProfit 150
Profit: $188
Total Trades: 311
Profit Factor: 1.02
Drawdown: $1078
Drawdown %: 1.08

Conclusion

 

From these initial backtesting results, this expert advisor does not look to be a worthwhile system to trade. The longterm results are mostly flat or negative. Further test cases may be needed to completely rule this system out.