One can be sure that those who read this article now know very well (and if not, will learn learn soon) the advantages of social trading which makes it possible to automatically copy to your account the transactions of many more successful traders. It is especially convenient as it is very easy to use the service - it is built directly in the MT4 and MT5 trading terminals.
Those who prefer to sell itself, may not even suspect that the tab "Signals" at the bottom of the terminal opens instant access to one of the world's largest social trading services. Though whom out of dozens of thousands signal providers to choose in order to have profit and not to lose your money is the main question.
This and further publications will try to identify specific mistakes of the subscribers and tell the readers how to avoid them in the future.Meanwhile we will share just five observations that the recent spring has brought.
To help the subscribers, the company MetaQuotes (the developer of the MT4 and MT5 platforms and the creator of the service "Signals") offers to us its own rating of the best and most reliable signals. Besides, visiting the mql5.com portal, signals may be ranked as far as their popularity among subscribers and other parameters are concerned.
And now, if you will, leaving behind the introductory part, let's move on to the observations which we announced above.
Observation №1 is that very often MetaQuotes ratings and those of the subscribers ...are not the same, and it is primarily due to the fact that the desire to obtain the greatest possible profit in the shortest possible time constantly prevails over subscribers. This, naturally, leads to a sharp increase in the chance of losing your entire deposit.
We do not in any way claim that the MetaQuotes rating is ideal, but at least it lacks such a factor as human greed and has dozens parameters adding to an objective assessment of the signal quality.
Observation №2, the results of which will not surprise anyone but which definitely confirm the fact that the higher the profit, the the greater the drawdown. For signals with a monthly increase of capital of 15-25% the drawdown usually ranges between 15 to 40 percent of the deposit. Further, with increasing returns, the drawdown begins to confidently steal up to 100%, and what happens when such falls happen - there is no need to explain.
Observation №3. The service created by MetaQuotes allows to rank the signals according to their life span as well. Yere the statistics vividly show that the signals with profitability of 100, 300 and more per cent a month do not usually live longer that 30 weeks. Those of them that have survived without the "plum" for more than 20 weeks are - alas! - on the tops of preferences of not only subscribers, but also in the forefront of other ratings. If you filter the signals according to their life span, you will see that the signals living for a year or more, on average, bring to investors not more than 5-10 percent per month. (Which, by the way, when compared with the interest on bank deposits, is not so bad. Or rather, is very good).
And now two more observations which for sure will be of use to the “Signals” service users and to which we definitely would like to draw your attention.
Observation №4 is the difference between the graphs of the balance of the account and the funds. This is probably the most important and the most obvious indicator of what you can expect from a subscription. And if the balance is steadily going up, and the funds remain somewhere at the bottom, or frequently jumping up and down, it clearly demonstrates the riskiness of a subscription to the signal.
Observation №5 is the currency pairs on which the signal provider makes his transactions and their spreads. When studying very decent signals it may suddenly turn out that some providers, apart from major currencies, work with quite exotic pairs as well, such as CAD/JPY or NZD/CHF. For example, Chinese traders like to deal with pairs with Yuan which are not present in the arsenal of many brokers at all, and even if they are, the spreads on them may be really astronomic.
Five is a quite round figure so in order not to bore the readers, let's stop here for the time being. Here these five observations are listed in short, but in the nearest future we will try to parse them with specific examples and give tips that we hope will allow the traders to avoid associated pitfalls.
Besides, we will share observations 6,7,... and maybe even 9 and 10 with you. And you will share observations №11, 12 and ...20 with us.
What is the goal? It is very “simple”- to jointly create a system that will allow everyone to subscribe only to the signals that can indeed bring us real profits with the least risks. Probably this is what the term “Social Trading” means.
