Exciting Forex Competition with $500 Prize

[f-man]

4XAngels.com is organizing a Forex Competition for the Best Trader.
This is not a usual competition, where the most profitable "trader" wins the prize. We want to find the trader that has a good strategy and not the trader that places a few lucky trades with a large lot size and let's them run.
We have a draft plan about the scoring system that will determine the winner, but we want to hear your ideas about the scoring rules.
Let us know what you think. How should we decide who is the best trader?

 

[f-man]

Let me give you some hints, so that you can comment on them:

How important is the Floating Draw Down for you?

 

[mothaya]

The final score = Gain% points + Profit Factor points + DrawDown points

 

[Pharaoh]

The problem with almost all trading contests is that they focus on one and only one thing - profit. No regard to risk is taken. The winners are typically the ones who risk their entire accounts over and over again. Yes, the end results are impressive, but the vast majority who use these tactics get a margin call.

Factors that need to be included:
Percent of account risked on any one trade - No SL = 100% risk - instant disqualification.
Percent of account risked at any one time.
Risk/reward ratio vs percent of wins/losses.
Maximum margin used.
Maximum drawdown as percent of balance and equity.
Stability of system - Equity and balance curves don't have to be straight lines, but should not look like a seismograph during a major earthquake. Some sort of linear regression should make this score-able.

How to weight all of the above will be the difficult part.

I also recommend running the contest for an extended period - several months at least. This will allow the trading methods used to be watched over time. At the end of the contest, all positions must be closed.

A more advanced version would be a live contest where % of the initial deposit successfully withdrawn would have very high weighting in the scores.

 

[f-man]

The problem with almost all trading contests is that they focus on one and only one thing - profit. No regard to risk is taken. The winners are typically the ones who risk their entire accounts over and over again. Yes, the end results are impressive, but the vast majority who use these tactics get a margin call.

Factors that need to be included:
Percent of account risked on any one trade - No SL = 100% risk - instant disqualification.
Percent of account risked at any one time.
Risk/reward ratio vs percent of wins/losses.
Maximum margin used.
Maximum drawdown as percent of balance and equity.
Stability of system - Equity and balance curves don't have to be straight lines, but should not look like a seismograph during a major earthquake. Some sort of linear regression should make this score-able.

How to weight all of the above will be the difficult part.

I also recommend running the contest for an extended period - several months at least. This will allow the trading methods used to be watched over time. At the end of the contest, all positions must be closed.

A more advanced version would be a live contest where % of the initial deposit successfully withdrawn would have very high weighting in the scores.

Dear Pharaoh,

Thank you for your feedback. Except from the point, where you mention that no SL = disqualification we agree with the other points.
The reason is that many traders use an EA to trade (Commercial or Custom Made) and many EAs do not reveal the actual SL. We wouldn't want to disqualify all traders using EAs.

As you mentioned, the hard thing is how to put everything together and come up with the scoring model.

Let's wait for a few more days and see if any other member has some interesting ideas to share with us and then we will upload some statements and discuss on specific examples, where it will be easier for everyone to follow.

 

[Pharaoh]

That's why I always recommend an emergency SL - the EA could lose connection with the broker just before some big surprise on the market and then the account gets wiped out.

Also, it's hard to calculate risk/reward for opened trades without a preset SL/TP. "Hold and pray" methods of trading where the trade goes several hundred pips negative and then closes for 10 pips profit don't seem as bad if there's no associated SL/TP.

I guess I could live with this, but with 2 adjustments.

1. Max floating loss as percent of account needs heavier weighting (negative weighting, of course).

2. There should be some sort of addition risk penalty against accounts that have no fixed SL.

Actually, a huge SL can be as bad. If the account would margin call before SL is hit, then there's no point in having one.

Without some sort of excessive risk penalties, the contest winners could easily end up being those who trade the riskiest strategies and are lucky enough to survive.

 

[Damon]

Hey F-man,

I am finally getting that brokerage off the ground, I will be offering a Forex contest at my brokerage (pellucidfx.com - Registered at Namecheap.com after it's launch.

i will only be watching open trade draw down and closed trade gains. As a fund manager for so many years I know a lot of the tricks that are played to fudge statistics and brokers. This stops moving/hidden SL games, and any other game I have seen and really gets down to whats important.

The only other thing I need to track is overall open trades DD to determine the weight they will be trading in the managed account, which is their prize If they want $500 bucks they can have that too, that is not exciting to me though.

Traders will be trading for 3 months for the contest, but they can start at anytime. They are not so much fighting each other, just the market.

Also they must trade live, as i couldn't care less about someone that can make a ton of paper money, the minimum account is $200 -The cool thing about that is we can get their account officially audited, while that is not possible on demo.

Accounts are pure ECN, STP. Quite literally we don't have a dealing desk and don't intend to have one unless there is a demand for it.

I would like to affiliate with FPA and 4Xangels somehow, PM me if you are interested. -I don't know if you remember but my brokerage is "trader regulated" and accepts anyone from anywhere (That I know of so far) The paper work and relationships are not setup yet but the whole thing will be completely transparent for traders to see for themselves (3rd party verifiable too).

Otherwise, please let me know what you think of my contest ideas.