Some Ideas to Select Trading Signals - page 3
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(A) "What do signal followers really need and want?"
What do followers need?
Don't lose my money!!!
What do they then want?
Then, make me some more. (And, don't take too much risk. I am very satisfied with small steady gains.)
It really is this simple. They are following because they don't have time or the desire or ability to trade the FX market but they think it is a great place to diversify their portfolio.When they come back from work, or wake up in the morning, they want to see that they still have an account and they hope it has increased in size at least a few pips.
However, because of the interplay of fear and greed on the part of the follower AND the provider, helping the subscriber meet both his needs and wants is a task fraught with peril, which is why I think it is worth discussing here.
Hi Steven,
I totally agree with you, actually in my vision, don't lose money is the mantra of any investor in any situation and the first step.
But one big problem today is that most of traders are focused on high and easy profits and this makes very hard to developers create trading signals that are safe enough to this goal.
So, choose the right signals for the investment profile may be the key, and I mean this as create your own and private methodology to select trading signals.
Another problem for me is that there are more risky signals than "don't lose my money" ones, because the market is higher.
And one solution to all this problems is clarifying more these selection methodologies, to protect subscribers from themselves (that is the main intention of this thread).
Thanks!
Hi Paulo,
Good point, but in my view you can consider investing in a trading signal and use Demo Accounts (play money) just to learn, like any other investment.
I may be wrong, and maybe the pressure of a paid signal is the key problem, but it's relevant also consider the advantage of investing and learning to create your own private methodology (as this can be used for all your next subscriptions).
Oi Paulo,
Bom ponto, mas na minha opinião, você pode considerar investir em um sinal de negociação e usar Contas Demo (jogar dinheiro) apenas para aprender, como qualquer outro investimento.
Posso estar errado, e talvez a pressão de um sinal pago é o principal problema, mas é importante considerar também a vantagem de investir e aprender a criar sua própria metodologia privada (como isso pode ser usado para todas as suas próximas assinaturas).
INVEST VOLUME SIZE MAX BY TRADE SIGNAL OPERATOR
Full risk free belo, feio ugly
50 to 1999 0.05 zezinho, paulinho
2000 to 4000 0.10 digital. pedrinho, jose
4000 to 6000 0. 15 lele, lulu, lolo
Hi Steven,
I totally agree with you, actually in my vision, don't lose money is the mantra of any investor in any situation and the first step.
But one big problem today is that most of traders are focused on high and easy profits and this makes very hard to developers create trading signals that are safe enough to this goal.
So, choose the right signals for the investment profile may be the key, and I mean this as create your own and private methodology to select trading signals.
Another problem for me is that there are more risky signals than "don't lose my money" ones, because the market is higher.
And one solution to all this problems is clarifying more these selection methodologies, to protect subscribers from themselves (that is the main intention of this thread).
You have certainly identified the main problem well: As humans we are always going to get drawn to the biggest % gain first. But the wise will have learned "there is no free lunch." So how do you make everyone WISE before they lose all their money on bad systems?
1. MQL5 has some good metrics, but they do not make it easy to find out their meaning.
2. They need additional metrics
3. They should do what myfxbook does and show both the actual equity curve and the closed trade profit curve. This, more than anything should wake people up.
4. MyFXBook has a Risk of Ruin table that is great too.
Thanks!
Thanks for your great contribution. The best hedge funds earn about 40% per year. Many traders see that they can get 40% in ONE day at 500:1 leverage and the entire world gets turned upside down for them. Their perception of reality becomes highly skewed. This is the beast that we are fighting here.
I LOVE IT that MQL5 controls the trade size of the followers based on the ratio of trade/account balance on the provider. Z, the monster of signal services, allows traders to select the number of lots to trade with for each signal provider trade. This is crazy. If you go to their site and look at "followers' results" you will be horrified. They only show the top 200 followers. Number 1 has a 1000%+ result, but number 200 has 9%. Z must have over 20k followers. And only the top 1% get better than 9%. So what in the heck is going on? There are some really great systems there, but the followers sabotage themselves.
They follow too many systems (some follow 30 or more!), and they don't control their use of margin. They trade with accounts that are too small. They go for the systems with flashy returns but ignore risk. I like it that MQL5 has made it so followers can only subscribe to one system with one account. That make subscribers much more careful.
Another signal following service (starts with a T) only publishes signals that have been profitable for 3 months or more (maybe 6). This is GREAT for followers, but discouraging for providers. It certainly makes everyone look at the longer term picture.
This is a very complex topic that merits lots of discussion.
Ideas to help followers get a good system ("Improving the MQL5 signal marketplace"):
Drawdown during testing.
MQL5 will not let a signal charge money unless it has had greater than a 70% draw down in the 30 day testing period. While I personally am grateful for that very generous buffer zone (as a signal provider), I think it is too big. If all providers knew that 50% or even 40% was the maximum, imagine how things might change around here!
If we are trying to protect subscribers from themselves, then we can do what the civil engineers do in the USA when they add speed bumps to the roads on some residential streets. We can add external controls like "Draw down must be 40% or less."
Clearly there is a fine balance of control vs free expression (signal style). What is the "sweet spot" though?
Pay only when Profitable
Z tells their signal providers that they will receive NO profits for months that were negative. That works well for sure to keep everyone thinking straight. Especially since on their model the provider gets paid by the trade whether profitable or not. (insanity!)
I saw one provider on MQL5 that promised to return the subscription fee if the signal was not profitable in the month.
C2 is another site that has the option for providers to charge by the trade by "only when profitable." And only when you have surpassed the "high water mark." This is an excellent idea.
Thanks for your great contribution. The best hedge funds earn about 40% per year. Many traders see that they can get 40% in ONE day at 500:1 leverage and the entire world gets turned upside down for them. Their perception of reality becomes highly skewed. This is the beast that we are fighting here.
I LOVE IT that MQL5 controls the trade size of the followers based on the ratio of trade/account balance on the provider. Z, the monster of signal services, allows traders to select the number of lots to trade with for each signal provider trade. This is crazy. If you go to their site and look at "followers' results" you will be horrified. They only show the top 200 followers. Number 1 has a 1000%+ result, but number 200 has 9%. Z must have over 20k followers. And only the top 1% get better than 9%. So what in the heck is going on? There are some really great systems there, but the followers sabotage themselves.
They follow too many systems (some follow 30 or more!), and they don't control their use of margin. They trade with accounts that are too small. They go for the systems with flashy returns but ignore risk. I like it that MQL5 has made it so followers can only subscribe to one system with one account. That make subscribers much more careful.
Another signal following service (starts with a T) only publishes signals that have been profitable for 3 months or more (maybe 6). This is GREAT for followers, but discouraging for providers. It certainly makes everyone look at the longer term picture.
This is a very complex topic that merits lots of discussion.
Great point Steven, because as complex as create a methodology for choosing just one trading signal, is creates a trading signals basket.
If you are using a MT5 platform for each trading signal no problem, but if you share your margin you are changing the original signal risk and money management.
You are right, this a very complex topic because people are not investing in instruments, but in black boxes, and it's necessarily look inside the box as much as possible to make better decisions.
Anyway, the mission of this thread is stress all these points and find the best solutions for all stakeholders, i.e., a very complex and maybe impossible mission! ;-)
I was looking the top Ranking for MT5 and MT4 ( https://www.mql5.com/en/signals ), and I may be wrong, but MQL5 rating formula looks more balanced now, and based on performance analysis as much as subscribers number and votes.
Anyway, I like more this formula because in my vision protects the subscribers with MQ market know how and experience in performance analysis.