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How to find a good signal?

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Ilya Kravchenko
161
Ilya Kravchenko  

It is quite obvious that just choosing one of TOP10 signals is not enough (we all remember how has ended up DELTA and many other former leaders of MQL5 rating). But what should we then check before subscribing to the signal? Unfortunately, most of subscribers only check 3 parameters of the signal: 1) growth, 2) maximum drawdown and 3) visual attractiveness of the growth graph. Those 3 things are important, but you should definitely pay attention to some other details too:

1. worst trade

regardless of what signal provider is promising, you should always be ready to lose that much money in one trade. Also, you should compare values of the worst trade and the best trade - it is not good if trader has lost much more money in his/her worst trade than managed to earn in his/her best trade

2. average profit and average lost

it is not good if average lost is much greater than average profit - it means that trader is not able to find good entries and is forced to use big StopLoss'es and small TakeProfit's

3. balance/equity graph

it is not good if equity (green line) is lower than the balance (blue line) most of the time - it means that trader is not able to find good entries and is just opening the trade and waiting when (if) the price goes to chosen direction:


Hope this small tutorial will help somebody. Thanks for the attention!

Grigorios Papaioannou
536
Grigorios Papaioannou  

I believe the most important is to have a solid long term track record, there is no market standard for that, statistics imply that more than 300 samples (trades) must have in order for the analysis to be valid! 

Also many signal providers starting multiple small accounts 50-100$ and then after blowing most of them they finally post the most successful that shows insane performances more than 200-300% in the first month...
Rob Cain
761
Rob Cain  

Statistics telleth the system, you have a valid point, why else would anyone take the plunge, would you look at losses, if there were lots and assume a bad system, and the opposite, wins and lots made a good system, a draw down to get anywhere is important, also how long are the trades, some signal providers are in the same trades for weeks, but the value and why they look appealing is there are so many trades open, the profitable ones closing make a great equity curve.

I think you have to look at growth, time, ratio, drawdown.

 I have seen so many systems that need in excess of $3000 starting balance, for me, as system starting with $100 has a wider and better chance of subscribers, even some "tyre kickers" may get involved and sure be it, would be an easier pill if lost.

Just my thoughts. 

Grigorios Papaioannou
536
Grigorios Papaioannou  
Rob Cain:

Statistics telleth the system, you have a valid point, why else would anyone take the plunge, would you look at losses, if there were lots and assume a bad system, and the opposite, wins and lots made a good system, a draw down to get anywhere is important, also how long are the trades, some signal providers are in the same trades for weeks, but the value and why they look appealing is there are so many trades open, the profitable ones closing make a great equity curve.

I think you have to look at growth, time, ratio, drawdown.

 I have seen so many systems that need in excess of $3000 starting balance, for me, as system starting with $100 has a wider and better chance of subscribers, even some "tyre kickers" may get involved and sure be it, would be an easier pill if lost.

Just my thoughts. 


Another important factor is the leverage used, some signals require unrealistic big leverage 400/500:1 with the usual consequences we all know. Finding a signal that does well, small DD and good solid performance (that works on all type of accounts not just ECN) and be available to US customers where 50:1 leverage regulation exists is a must!  
Angelito Cartagena
405
Angelito Cartagena  
As a general rule it is important to use a signal that use good risk reward ratio all the time, never use martingale or grid style of trading, there are some signal here that has very high win lose rate but some of them implement small TP with high SL setting that it may not work in the long run, I have a free signal that is being develop you can try it, it is not a high frequency trading signal but I can say that your equity will be safe. Good luck!
Meng Yin Teoh
1813
Meng Yin Teoh  
Angelito Cartagena:
As a general rule it is important to use a signal that use good risk reward ratio all the time, never use martingale or grid style of trading, there are some signal here that has very high win lose rate but some of them implement small TP with high SL setting that it may not work in the long run, I have a free signal that is being develop you can try it, it is not a high frequency trading signal but I can say that your equity will be safe. Good luck!

Good advises.

I wish to add some other rules. A good signal should never ever use the following tactics:
  • Martingale
  • Grids
  • Unlimited average down
  • No stop loss
  • Extreme low risk reward ratio
  • Account balance manipulation
  • Infinite monkey
Angelito Cartagena
405
Angelito Cartagena  
Meng Yin Teoh:

Good advises.

I wish to add some other rule. A good signal should never ever use the following tactics:
  • Martingale
  • Grids
  • Unlimited average down
  • No stop loss
  • Extreme low risk reward ratio
  • Account balance manipulation
  • Infinite monkey

I guess low risk reward ratio is also the same with using huge SL with small TP, I agree draw down is also a good way to gauge one's strategy if it is safe and stable,a strategy that can keep his draw down low even the bad days will have a good chance of staying in the market for a long time and will bring profits in the account.  
Grigorios Papaioannou
536
Grigorios Papaioannou  
Meng Yin Teoh:

Good advises.

I wish to add some other rules. A good signal should never ever use the following tactics:
  • Martingale
  • Grids
  • Unlimited average down
  • No stop loss
  • Extreme low risk reward ratio
  • Account balance manipulation
  • Infinite monkey

another good measure is sharpe ration, the higher the better, if its below 0.5 its almost like random calls...
Meng Yin Teoh
1813
Meng Yin Teoh  
Grigorios Papaioannou:

another good measure is sharpe ration, the higher the better, if its below 0.5 its almost like random calls...

Performance statistic has no meanings if signal providers are allowed to use dirty tactics to manipulate the numbers. But then, who cares? Who cares as long as two out of three parties making good money?
Denis Sartakov
1176
Denis Sartakov  
Ilya Kravchenko:

It is quite obvious that just choosing one of TOP10 signals is not enough (we all remember how has ended up DELTA and many other former leaders of MQL5 rating). But what should we then check before subscribing to the signal? Unfortunately, most of subscribers only check 3 parameters of the signal: 1) growth, 2) maximum drawdown and 3) visual attractiveness of the growth graph. Those 3 things are important, but you should definitely pay attention to some other details too:

1. worst trade

regardless of what signal provider is promising, you should always be ready to lose that much money in one trade. Also, you should compare values of the worst trade and the best trade - it is not good if trader has lost much more money in his/her worst trade than managed to earn in his/her best trade

2. average profit and average lost

it is not good if average lost is much greater than average profit - it means that trader is not able to find good entries and is forced to use big StopLoss'es and small TakeProfit's

3. balance/equity graph

it is not good if equity (green line) is lower than the balance (blue line) most of the time - it means that trader is not able to find good entries and is just opening the trade and waiting when (if) the price goes to chosen direction:


Hope this small tutorial will help somebody. Thanks for the attention!

in my humble opinion there are some additional fine reasons why one signals have many subscribers  

and other with the same features  don't have at all...

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