(Mike Swanson)


Some reasons why I’d be VERY cautious about buying Mike Swanson’s DDSMM:

1. [NOTE: Software development has been my career since I left high school in 1979. Over the last few years I’ve written more than 400 MT4 indicators and EAs. I would describe myself as a programmer who dabbles in forex trading]. I’ve just watched a replay of a Mike Swanson webinar promoting DDSMM, and one of the slides states: “DDSMM Automated --- caters to virtually all trading strategies and can be used with virtually any system, robot or EA (cost: $1997)”. Well, within MT4, it is impossible for one EA (e.g. DDSMM) to interrogate, let alone “take over” (Mr Swanson’s words) the running of, another EA and change the lot sizes being sent to the broker in a MQL4’s OrderSend() command. Moreover, there are many EAs that use their own MM like scaling in/out, hedging, grids, martingale etc, and it would be impossible to write an EA that was smart enough to decipher every conceivable MM strategy (especially as different programmers use different coding styles and techniques), let alone have the intelligence to adjust it optimally.

2. If I understand him correctly, Mr Swanson is saying that he can transform a losing system into a winning system, by modifying the trade volumes (i.e. position or lot size with each order). Of course that’s mathematically possible, but the trader would need to know in advance which trades have a higher probability of winning, and then size them (larger) accordingly. There are only two ways that I’m aware of, that would facilitate this:

i) Understanding market behavior, i.e. which would involve some kind of (fundamental or technical) analysis, to ascertain various probability of different trading ‘setups’. In other words, DDSMM would need to have this analysis built into it. In my view, this would come under the category of ‘strategy’ (which ultimately determines order entry/exit levels), rather than MM (position sizing). Yet Mr Swanson is saying that DDSMM can work its magic with any existing strategy.

ii) Serial correlation of trading results, i.e. non-random clustering of winning or losing trades. Or in simple language, whether a winning trade is more likely to be followed by a win or a loss (for example, a trend following system might encounter a series of losses when markets are rangebound). The problem here is that it would be impossible for DDSMM to decipher the strategy involved (and for it to work generically, it would need to be able to decipher, and devise suitable sizing for, every conceivable trading strategy); or alternatively, it would need a vast history of several hundred trades already generated by a strategy, to prove that any 'clustering' of wins or losses were statistically valid, i.e. that we’re not simply being ‘fooled by randomness’.

In my view, none of this is possible; and even if it was, it would certainly not be sold to the public for $1997.

3. If it’s possible to turn any losing strategy into a winning one by using only MM, then why aren’t the big banks and institutional traders using MM modifiers like DDSMM? Why do these institutions spend millions of dollars employing economists and strategists, if markets can be conquered simply by using MM?

4. It’s mathematically impossible to use MM to alter trade expectancy, and therefore turn a losing strategy into a winning one. A solid mathematical proof has been posted here:
Trading Game System Discussion - Page 4 @ Forex Factory
Moreover, how is it that Mr Swanson has discovered a ‘holy grail’ MM that not only defies math, but has also otherwise escaped discovery by the smartest mathematician traders on the planet?

5. In the webinar replay that I watched, Mr Swanson stated that candle patterns were unprofitable. He showed a pattern (tweezer tops) and stated that it had a 52% success rate. He avoided an explanation of what markets, instruments (forex pairs), timeframes or conditions were used during his testing process. He also mentioned another candle pattern that he claimed had a 62% failure rate, but couldn’t remember what the pattern was. He then went on to show a candle pattern which he uses himself, stating that it had a success rate of 70%-80%, but again, never explained the test conditions. He cherry picked three chart based examples where it provided directional bias; however, I noticed other examples of the pattern on the same chart where it failed equally as spectacularly. Granted, this has nothing to do with MM, but it is a frequently used marketing ruse.

Unless Mr Swanson can provide some very good answers to these questions, I won’t be buying any of his products.
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