Discussion of article "Social Trading. Can a profitable signal be made even better?"
Thanks Mr. Rustem Bigeev. This article is enough for the any wise subscribers..!!
There are Signal Providers and there are Signal providers. Most subscribers are still preys to the ways many Signal Providers.
I too am grateful for your sterling contribution here. Thanks Mr. Rustem Bigeev. It Speaks for itself and it provides more than its weight in precious metals and rare gems of wisdom, knowledge & understanding, if only we choose to see, having read. Bless! P.S. Now added to my list of favourites ;-).
Thanks for this.
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New article Social Trading. Can a profitable signal be made even better? has been published:
Most subscribers choose a trade signal by the beauty of the balance curve and by the number of subscribers. This is why many today's providers care of beautiful statistics rather than of real signal quality, often playing with lot sizes and artificially reducing the balance curve to an ideal appearance. This paper deals with the reliability criteria and the methods a provider may use to enhance its signal quality. An exemplary analysis of a specific signal history is presented, as well as methods that would help a provider to make it more profitable and less risky.
As an example for analysis, we are going to use the data on one of the "longest-running" signals. Its statistics starts in March, 2014.
The data will be analyzed as follows.
To start with, we are going to prepare a file of trades that we will download from the official signal page. Then we will sort the data by three criteria: Symbol, Trade Direction, and Trade Opening Date. Upon that, we will start consider the trades by symbol and by direction. As I wrote above, along with the data on profits/losses in the account currency, I will also analyze the performance of trades in points (as in trading with a fixed lot size), as well as the changes in the lot sizes of the trades.
The values of lot sizes and of balance in points were normalized to look proportionally in the general chart.
AUDCAD - BUY
The chart above presents the statistics of trades on AUDCAD in the Buy direction. The green line representing the balance changes in the account currency grows practically exponentially, if the recent drawdown is not taken into consideration. By the way, that drawdown was caused by the fact that the lot sizes of the trades exceeded by multiples those made the day before (this is shown by the yellow line that represents the changes in lot sizes). The provider went out of that drawdown due to a significant increase in the lot sizes of trades, which means due to a proportional increase in risks. One might as well say that the provider had luck and its trades with extremely high lot sizes had finally turned out to be profitable. It's hard to imagine what would happen to the deposit, if fortune were less favorable to it. Please also not the blue line that represents the statistics on trades without considering their lot sizes. It is within the negative area, and the signals are basically losing, while the profitability of the trades on that symbol is only achieved due to playing with lot sizes.
What can be recommended to the provider in trading on this symbol? Revise the settings of the EA or improve on the rules, if trading is manual.
Author: Rustem Bigeev