Rummaging around the online forums where many beginner traders hang out, it is not uncommon to hear a trader exclaim, “I found the holy grail! If I just buy and sell when the MACD gives me a signal I will be rich!”. But is there any merit to this?

Many of the popular oscillators do give what appear to be obvious looking trade signals. The funny thing is that these signals typically come after the price has already made it’s move. This is because of the lagging nature of indicators. In the same way that price was at 1.5566 and now its at 1.5890, you can also observe that the price was below the moving average and then it crossed through and is now above the MA. It seems obvious that you should buy when price crosses through this MA. Hindsight, however, is always 20 20. Once you are looking at live price data it is very hard to know if it is going to move up or down – no matter what a fancy oscillator says.

FXCM has released over 20 Expert Advisors as part of an incentive to encourage traders to open up FOREX accounts. They have coded these simple EAs to follow some of the most popular indicators in technical trading. We decided to put these systems to the test. Backtests that is. Check out our results to see how these free EAs stood up to 8 years of backtesting on several of the major currency pairs.

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.

Check out our reviews of FXCM’s free expert advisors:

1. Linear Weighted Moving Average Crossover EA Backtest Review

2. Awesome Indicator Oscillator Backtest Review

3. Bollinger Band Trading System

4. Bollinger Band Trading System with ADX Confirmation

Conclusions

While FXCM has done a good job providing a big array of simple expert advisors for free, they are just too limited to be used as stand-alone trading systems. Relying solely on one or two oscillators will not hold up long term as a viable trading robot. Therefore, we do not believe any of the EA’s are suitable for live trading. Yet, they do provide a good framework and can help educate traders on the function and reliability of the indicators themselves. This knowledge could be well applied in manual trading or used to come up with new automated trading robots.