Dear Eagle FX Investors,
We hope you are doing well. We have some mixed news and important information to discuss with you regarding the Eagle FX program, so please be sure to read this email in its entirety.
It has been a while since we have sent out any email updates as we have been deep in to some work on wrapping up our first ever futures project (which should finally be done by the end of this week). However, we need to address the big white elephant in the room at the moment, which has not been going anywhere. We are talking about the Eagle FX program. As stated we have some mixed both bad AND good news about this.
As most of you are aware, we have been dealing with some rather big discrepancies on Eagle FX since we started trading it at Synergy at the start of this year. The strategy originally started trading at IC Markets, (where performance still continues to be quite good). However, it has been a different story at Synergy FX, and although we were originally waiting until the end of the month to make some adjustments and/or decisions about it’s future at Synergy, today was kind of the straw that broke the camel’s back for us as we incurred a further -3.75% loss after an already negative start to the month.
As most of you know, this strategy is EXTREMELY brokerage sensitive as it not only scalps for small pips, but it does this on the cross currency pairs where the spreads vary considerably from one broker to another due to lower trading volumes.
Still Synergy’s spreads on the crosses are close to ICM’s (maybe a little worse). Their bridge is the exact same as ICM’s (PrimeXM) and their data feed is quite similar (tick data is even a little better at Synergy). In addition to this, our back test models have shown the strategy performs equally as well at Synergy FX. But performance between the two live feeds is proving to be vastly different as more time and data unfolds. To give you an idea of the differences, you can see the ICM account vs. our Synergy account (with the exact same system) in the links below.
Eagle FX at IC Markets: http://www.myfxbook.com/members/ManagedFXHub/eagle-fx-march-dec-2013/771445/vTTcBTIdNXdd86DYeMB6
Eagle FX at Synergy FX: https://www.myfxbook.com/portfolio/eagle-fx/872109
We have been analyzing this situation very, very closely this month and we have been trying to piece together the reasons why performance is suffering at Synergy FX and not at IC Markets, when everything is so similar in terms of technical infrastructure. Finally after looking through the history with a fine tooth comb and a little help from Synergy’s bridge provider, we have found the culprit, and it turns out that it is the Rollover at Synergy.
This happens at the same time each day and for those not familiar with it, it’s simply a feature that effects any positions open at end of day EST, as there is a daily rollover (interest payment) you pay for an open position depending on your established margin level and position in the market. Many brokers also during rollover also have their LPs disconnect and then re-connect. This is the case at Synergy.
When this happens, we get two things that happen at Synergy. 1. A disconnect in the server happens for a few mins, and 2. A spike/gap in the spreads happen when the LPs re-connect. The roll at Synergy is at 21:00 server time.
Unfortunately this is the prime time when Eagle FX trades, which is the tail end of the US session and the early Asian session (quite hours). The server disconnect and the spike on spreads from the roll, is not to drastic MOST of the time on the majors (i.e., the EU) however it IS rather significant on the cross pairs, which are the primary scalping pairs for Eagle FX, and can either make or break an open trade. Not only can this stop out open trades, the spike can trigger false trades which should not normally open. In our discussions with Synergy on the matter, there is nothing that we can do here, unless we want to move to a b-book feed (which we don’t want to).
So this really is the proverbial nail in the coffin for Eagle FX at Synergy, in that we know our discrepancies will continue. The only way to avoid it would be to code in to the auto system to not take any new trades during the roll, and to widen all the stops during the roll (i.e. before and after) on existing open positions so that they do not get stopped out. While this is possible, it can open up doors for other problems.
Contingency Plans – the Good News!
We shared this news with the Eagle FX developers, and of course it seemed blatantly obvious after uncovering it. We both agreed that given this is an Asian scalper we will not have near as good of a future with it at Synergy (and this is the only brokerage we trade it at, as it is too sensitive for a copier to duplicate it to our other brokers) vs. ICM.
The good news is that we have firmed up a different (and arguably better) go-forward plan with the Eagle group to carry on.
We have shared with a few of you a different strategy that the Eagle group trade, which we have been testing out ourselves since Jan. You can view this account here: (link)
This is a rather large account we have been running for over 1 year with one of our partners, with the sole intention of testing various strategies and primarily algos. It has only been since Jan 12th when we switched it over to the Eagle v2 strategy that it really began to actually make money.
There are a few different variations of this strategy. One can work on various CFDs and commodities, in addition to Forex. The Eagle team have been running this particular strategy with very high risk (especially at the start) on both Forex and commodities and it has withstood a lengthy test as you can see from their stats with it.
The adaption to run on only Forex pairs however, such as on the CITI Bank myfxbook testing account above, checks all of the boxes for us. It is not scalping for small pips during the Asian session. It has a very nice expectancy (over 15 pips, and its average win is 30 pips). So it is not susceptible to any problems at rollover even if it did trade during this time. It trades many pairs (major and minors – and can even trade CFDs and commodities). It is also robust and scalable so it can be enjoyed at all of our brokers, not only Synergy FX.
So in our view, we feel that this is a very good change of plans given the predicament that we are in with the current strategy and its current environment. We had originally considered offering this program to some of our investors privately as a separate strategy to diversify across. However this recent discovery has presented a replacement opportunity for it, which works quite well.
Making the Change
It is our job as part of our analysis to identify these types of situations when they occur and to react accordingly for the ongoing safety of our managed capital. Typically we are reluctant to make such changes and we normally would not be so quick to react, however the combination of the above factors gives us enough conviction that we need to react to this before the track record discrepancies become worse (and we have been down this road before).
We simply do not see the Eagle discrepancies improving in our favour at Synergy FX. So we would end up with an auto-strat that works amazing at one broker, and not good at another (the one we are set up at).
Our other option would be to open a MAM structure at IC Markets and move everyone over to that brokerage, where we KNOW that the original scalping strategy will work fine. While this is viable, it is a very time consuming and potentially problematic move, for both us and our investors. We believe changing the strategy from scalping to the new swing strategy is not only a better move than that, but the more we analyze it, the more we actually start to prefer it even to the original Eagle strategy in its most suitable environment. So there is a silver lining to this in our opinion.
How Does this Affect You?
You do not need to do anything at all to realize these changes. We have already spoken at length to the Eagle team, and they will do as we request in this situation with regards to making the change, and even though they have some different partners who they work with in regards to the v2 strategy, they will of course honour all of the high water marks for everyone, and hopefully the v2 strategy will bring any accounts under it, above it rather quickly.
If however you do not wish to participate in the v2 strategy, you must move your account out of the MAM, and in to another one (or just close it down). We will commence trading the new strategy on Monday, March 24th (5 days from now) to allow time for anyone who wishes not to participate with the v2 strategy for Eagle FX.
In Summary
Adapting is sometimes the name of the game in the FX markets. Obviously we prefer to not have to do make any changes ever and everything just work smooth, but the reality of things are, that we do not always have this luxury.
On this note, we actually made a change to our Stone Fund program this year (from v1 to v2) after trading with v1 for almost 3 years!!! We were a little hesitant to make that change; however it has turned out to be one of the single best moves we have made yet! Stone V2 has brought a tremendously stable auto-strat to our portfolio (one of the best we have come across to date). So we certainly hope that this change will be of the same calibre.
We cannot give any guarantees as to the longevity or success of any of our trading programs, just as we cannot predict the future. We also understand that as our funds grow, issues may arise in their ability to be profitable, whether that is due to liquidity, strategy stalemates, technical problems, and in general, just our trader’s abilities to perform or adapt themselves. This is something we need to be aware of, and on the top of our game about.
Unfortunately sometimes there are no easy ways around some of these issues. However we are setup as best as possible to detect any of these issues with any of traders well in advance, and to react accordingly. We anticipate these changes needing attention occasionally, and of course we will adapt to them as they arise.
We are constantly adjusting our portfolio when required and the risk profile of all the invested capital. Thus we feel good that the proposed change shall be a good one.
As always, we will continue to grow and improve and strengthen our line-up where we can. Please do let us know if you have any questions or concerns and as always we would welcome a chat at any time if you want to get in to more detail on anything regarding this or anything else for that matter.
To our forward progress!
Managed Forex Hub