Forex Freedom Rocks scam ? Lets discuss this program.

[FrankTheTank]

Is Forex Freedom Rocks Scam ? First of all, be very careful of any advice you receive about this program from a current member (I am not a member). The reason this program is very popular is they have an affiliate marketing programming that allows people to earn lots of money by referring new members. Therefore, take everything you hear about this program with a grain of salt and remember that people are trying to sell you the program even if they appear to be helpful and unbiased.

With that being said, I do NOT think freedom rocks is a scam. The system appears to be profitable and it seems to be working well for everyone at the present time. It is impossible to know if this system will continue to work in the future.

Here is the 30,000 foot overview of Freedom Rocks. Freedom Rocks is an automated Forex trading strategy (to learn more about forex, we suggest you study at Babypips: http://www.babypips.com/school/). You can make money two ways using this program. Both methods require two open positions on two correlated cross pairs. For example, you can have a long position on EUR/USD and a short position on USD/CHF. Because these pairs are somewhat correlated, you position is essentially hedged. You can make money by opening several positions and closing them when they are in profit and holding onto your looser until they eventually reach profit. This is very similar to a "grid" type of trading system. The second way you make money is through earning interest by your brokers swap rates. By choosing the right currency pairs, you can earn 10-100% interest per year depending on your leverage and level of risk.

I am NOT a member of Freedom Rocks. I did try to the free demo account and decided not to join. Here is the main reason why I decided not to join:

One of the most important things I look for in any short term investment is a risk/reward ratio on a monthly basis. I typically like to keep this ratio at 1.0 or less. For example, if I am going to risk half of my account 50%, I would expect a return of at least 50% each month. With Freedom Rocks, it seems I need to set my portfolio up to risk 10-15% of my account each month to get 4-6% in returns each month. As you can see, the high level of risk does not seem to justify the relatively low returns.

If you dig a little deeper on the internet, you can find posts from current and previous members that report very large account drawdowns. Most of the time their accounts bounce back, however, that kind of risk is not okay for me personally which is why I have decided not to join freedom rocks.

Please note there are a lot of people who are smarter then I am using this program and I invite them to post their comments below.

Hi FrankTheTank,

A very nice post from a person that is not a FR member. Thank you for trying to give an unbiased report. Too many posters use the word "scam" to start a flame war. I'm always interested in give and take in an honest discussion.

Your point about taking anything you hear from FR members with a grain of salt is well taken. I'd like to extend that to anything you read on a forum or on the Interenet period! I am a member of FreedomRocks and I know that there are some posters who will exagerate to drum up business. I spent too many years in the industry with the Feds looking over my shoulder to feel comfortable with that approach. I ( and many others) prefer to let the program itself do the talking. The best advice I can give is to check out the various websites (mine included), watch the product movie (important!) and then decide for yourself.

Your overall view of FreedomRocks is generally correct if overly simplified. It could be you need to come down to around 20,000 feet or so to see some more detail I think you caught the gist of it, though.

I am curious as to how you figured out you were risking 10% to 15% of your portfolio every month in order to get a 4% to 6% return. Could you expand on that? There may be a misunderstanding here but I would like to get some detail. The misunderstanding might be mine!

Finally, folks, don't let all the talk about MLM throw you off. FreedomRocks is first and foremost a trading program. They do offer a "referral rewards" program but it is NOT a requirement and we have a number of traders that are not taking advantage of it. I can also tell you with out fear of contridiction (I hope) that everyone in FreedomRocks is there for the trading. The referral program is a very nice added extra for those of us who are interested. It can easily offset the cost of the trading system everymonth and is worthwhile for that alone. My own opinion of course.

Thanks for the chance to help fire off a new forum. I'll be interested in seeing the comments that follow. Have a very happy and profitable New Year everyone.

[FrankTheTank]

Jim,

Thank you so much for posting your comments.

I think the misunderstanding is probably mine but lets try to get this sorted out on the forum here so that everyone can read it.

I think the reason for the misunderstanding stems from the very unclear instructions on how to properly use the Freedom Rocks portfolio allocator and the term "margin percentage" used on this allocator.

It is my understanding that "margin percentage" is the amount of my account I will allow the Freedom Rocks program to control. So for example, if I choose 30%, then in a vary bad scenario my account could be down by 30% at any given time during the month. I then look at the percent annual return using 400:1 leverage and EUR/USD + USD/CHF pairs and I see an annual return of 45% (roughly 3.75% monthly).

I next assume this means I am essentially risking 30% of my total forex account at any given time to make 3.75% monthly.

I realize there may be some flaws in my assumptions but is this generally correct?

I think I understand your question now.  The margin is the amount that is required to be in your account in order to trade the number of lots you wish.  For example, if you have a $10,000 account and are trading with 10% margin at 400:1 you can control $400,000 dollars ($10,000 * 10% * 400).  If that $400,000 drops to $391,000 (2.25%) you are out.  All of your money is at risk at all times.  The margin is just one parameter for controlling that risk.  If you were trading at 5% margin under similar circumstances you could only control $200,000 but it would take a move from $200,000 to $191,000 (4.5%) to knock you out.  You double your chance for survival.

With any highly leveraged investment you are going to have wild swings in equity.  This is just the nature of the beast.  The trick is to survive them.  Using a low margin percentage and reasonable leverage FreedomRocks should keep you in the game for the long-haul.  The only way to do an honest risk/reward analysis is to set your parameters, trade for 6 months to a year and see how it works out.  Every person's portfolio will have a different ratio depending on how they set it up. 

As a real world example, I am trading the EUR/USD, GBP/USD and USD/CHF using 10% margin at 400:1.  That is at the limit of my tolerance.  I would be happier around 5% to 7% but I was feeling "spunky" the day I set it up.  Still, I think that given the volatility of those pairs, I should be able to survive anything short of a disaster.  I am getting 47% annual interest for my trouble and at least that much again from trading.  That seems adequate reward for the rather small chance of a wipe-out. 

As an aside, some folks use a mental stop-loss to define their risk.  They will quite trading at a 20%, 30% or 40% drawdown.  I disagree with that approach for FreedomRocks as it really defeats the program I think.  Different strokes for different folks, however.

Hope that helps.

[FrankTheTank]

Yes. That does help. Thank you.

I guess my next question is what is the probability (using historical data) of a margin call using 400:1 leverage and 10% margin verses the probability of a margin call using 400:1 and 20% margin, etc.?

I assume that the probability is equal using 400:1 no matter what your margin percentage is. However, people with higher margin percentages risk loosing more of their account.

The next question would be: what is the probability of a margin call using 200:1 vs. 400:1 and 10% margin?

These are questions that would help a lot of traders determine the risks of this system and I have not seen the answers posted anywhere. I realize that using past data is not a good way to predict the future, but, at least it can help.

As a side note, I am able to make some very cool calculators using a Crystal program (shown here: www.funcalcs.com )

If anyone can help me figure out the formulas for calculating interest returns based on currency pairs, margin, and leverage, I could make an interactive calculator for FR that might help a lot of people determine their ideal settings.


Note: this discussion is continued on the next page -
http://www.forexnewstrade.com/index.php?topic=11.5

[tbone]

interesting. i will have to read more about this program

Hi FrankTheTank,

Wow, you don't ask the easy questions, do you?

Historically the probabilities of getting a margin call at any given leverage will depend on margin AND the pairs traded. I wish I had enough historical data to give you a fixed number but I don't nor have I ever seen such a study. Nevertheless, let me see if I can at least clear up the concept.

Given any fixed set of pairs, and a fixed margin of, say, 10% the risk of a margin call at 400:1 will be double the risk at 200:1 as it will only take half the move at 400:1 to eat up free capital. At any fixed leverage, say 200:1, and a fixed set of pairs the chance of a margin call will increase dramatically as margin increases. This is because your free capital will decline as required margin increases. Given a fixed margin and fixed leverage, the chance of having a margin call increase as the volitility of each curerncy increases or the correlation between pairs decreases. That should be more or less expected.

The problem is not so much one of past data not being a good predictor of future results (it isn't) but that the nature of the markets is fairly random. The odds of the markets moving suddenly against you tomorrow are totally unknown. The best you can do is develop a strategy to preserve capital during adverse moves and take advantage of opportunities to buy cheap or sell dear when ever they are presented to you. This is what the FreedomRocks software aspires to do.

As to the calculator, it has already been built into the FreedomRocks software. Currency pairs, interest, leverage and margin can all be played off against each other in a "what if" scenario. All the software is available to clients, reps or even just the curious that have opted for the 15-day free trial. No credit card is needed to sign-up for the trial so come on by and take a look.

I need to state for the record that I am not an employee or agent of FreedomRocks and my opinions and trading results are strictly my own. I am a very happy client and also belong to the 'Referral Rewards' program and do have my own website (see my sig line).

Again, I hope that is helpful.

[FrankTheTank]

Thank you. That was helpful. Let me just digest what you wrote for a few hours and get back to you

[FrankTheTank]

Okay. I have thought about this for awhile and I think I figured out what my biggest problem with Freedom Rocks is (and its not their fault).

Whenever I look into a system or strategy (especially one that is run automatically like FR), I need to see some serious back and forward tests that show all the key stats such as; drawdown, average win, average loss, win/loss ratio, etc.

I realize that FR can not provide this because "everyone has their accounts setup differently". However, it makes it very hard for a new member to "take the plunge" without knowing exactly what to expect. Perhaps they could use the 2 or 3 most common setups and run some back tests on those to show people?

I bet most of the debates and issues people have regarding FR could be resolved with more data and back tests coming from them.

Hi FrankTheTank,

I think you pointed out the problem and it is unresolvable. Who decides the pairings, leverage and margin. I can build a lovely portfolio that trades very well but not suit you or vice-versa. There is no way to do it. Futher, there may be compliance problems as setting up a portfolio as 'representative' and enticing people to trade off the results.

The program is what it is. It makes no guarantees and only offers a strategy that that should work in most market situations and have a relatively low risk. The risk is there, however, and your loss can be total.

The trading since the begining of the year has been spectacular. Some folks are up multiple triple-digits and some 'gunslingers' have had margin calls. I've done very, very well with a fairly conservative portfolio. It certainly isn't for everyone, though.