How are signal % gain calculated? Can they be gamed - page 4
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Fernando you are wrong, growth is not affected by signal withdrawals, only profit is.
Alain's argument is correct: "If you follow this signal from the start without withdrawing you would have this growth."
Read the following article please: https://www.mql5.com/en/forum/10773#q23
Before this thread, I would have agreed with you but after looking and analysing in more detail how MetaQuotes is calculating things and giving this hypothetical % growth, I am sorry but I no longer agree with you!
When the thread was started, I looked at several signals and some gave the correct % growth and others did not, and the difference between them were the effect of the withdrawals causing the growth values to be inflated.
There is just no way a subscriber can achieve this hypothetical growth when a provider has many withdrawals, and if you look at the very simple example I gave in my previous post you will see why.
Before this thread, I would have agreed with you but after looking and analysing in more detail how MetaQuotes is calculating things and giving this hypothetical % growth, I am sorry but I no longer agree with you!
When the thread was started, I looked at several signals and some gave the correct % growth and others did not, and the difference between them were the effect of the withdrawals causing the growth values to be inflated.
There is just no way a subscriber can achieve this hypothetical growth when a provider has many withdrawals, and if you look at the very simple example I gave in my previous post you will see why.
So, is this wrong too?
Time-Weighted Return (TWR) that measures the performance of an amount invested in the system since inception. TWR measurement is required by the Global Investments Performance Standards published by the CFA Institute.
Is CFA Institute wrong too?
I tried to include the actual link, but its getting auto deleted, because its a MQL5 competitor's website.
So, is this wrong too?
Time-Weighted Return (TWR) that measures the performance of an amount invested in the system since inception. TWR measurement is required by the Global Investments Performance Standards published by the CFA Institute.
Is CFA Institute wrong too?
(I am sorry that I've put the above link in this comment, but this argument has to be resolved).
No you misunderstand, I am not say that the TWR is incorrect! I am saying the the combination of using those calculations and the way signals are implemented by MetaQuotes cause the values to be contradictory, when (and only when) withdrawals and deposits are involved, as it alters the dynamics of how the positions sizes are calculated and used.
One must remember that the TWR was meant with certain and specific conditions in mind, and the way things are carried out by MetaQuotes "breaks" those conditions and invalidates the values calculated by TWR.
If you or Alain are truely interested in my opinion and are open to look into it, and plan to confront MetaQuotes with a request to change, then I will put aside some time and make a simulation with just a few trades in order to show the difference of the two and how the compounding effect gets distorted and the hypothetical % growth becomes unachievable. However, I don't see MetaQuotes changing this at all.
No you misunderstand, I am not say that the TWR is incorrect! I am saying the the combination of using those calculations and the way signals are implemented by MetaQuotes cause the values to be contradictory, when (and only when) withdrawals and deposits are involved, as it alters the dynamics of how the positions sizes are calculated and used.
One must remember that the TWR was meant with certain and specific conditions in mind, and the way things are carried out by MetaQuotes "breaks" those conditions and invalidates the values calculated by TWR.
If you or Alain and truely interested in my opinion and are open to look into it, and plan to confront MetaQuotes with a request to change, then I will put aside some time and make a simulation with just a few trades in order to show the difference of the two and how the compounding effect gets distorted and the hypothetical % growth becomes unachievable. However, I don't see MetaQuotes changing this at all.
OK, noted Fernando.
I don't think its worth your extra work, because its true that Metaquotes isn't keen on changes. I've made quite a few suggestions myself over the time and the only one that was ever endorsed, was the light blue line in the growth chart of newly connected signals, that represent the period prior to the connection of the signal to the MQL5 signal database.
OK then! I will leave it to you, Alain, and other users and providers to analyse things for themselves and come to their own conclusions, and should they disagree with the MetaQuotes metrics, then they can do the necessary calculations on their own if the wish.
I don't agree you give up
I am interested to understand your point of view as I am still thinking you are incorrect. But I am open minded and ready investigate further. Of course I can't promise anything about Metaquotes, but if something is really wrong I will try to convince them for sure.
Since I don't use signals nor provide signals, nor plan too, my motivation to do the extra work do demonstrate the point, is not really there, especially not now during the festive season.
So, it all depends on the "demand" and whether or not I can overcome my "laziness" to do it!
Ignoring the extra Deposits and only considering Withdrawals, I would need to simulate setups with several trades over a certain period of time for 4 scenarios in order to demonstrate it:
In all 4, the subscriber would never withdraw any money in the hopes of achieving the reported hypothetical % growth.
No, you will not! That is what I have been trying to explain but have been unable to put it into words properly.
In order to achieve the hypothetical gain, the subscriber would need to increase his balance or adjust his % in order to offset the reduction caused by the provider's withdrawal.
For example, lets say the signal balance is $1000 and the subscriber also has a $1000 balance and is using 50% signal ratio, so that when the signal gains 10% ($100) , the subscriber will be gaining 5% ($50).
When the provider takes out 20% of his balance, bringing it down to $800, a 10% gain is now $80 and for the subscriber it will now be only $40 even though he did not make any withdrawal at all on his own account. In other words, he is not even maintaining the simple growth any more, and his position size drops instead of increasing geometrically and the hypothetical compounding cannot be achieved even if he does not make any withdrawals.
The only way for the subscriber to maintain the natural compounding effect, would be to either increase is % of the signal, from 50% to 62.5% or increase his balance to $1250, and he would have to calculate and do this on every single withdrawal the provider does in order to compensate and achieve the hypothetical % growth. This is obviously not feasible and not in the spirit of the metrics that are calculated and shown by MetaQuotes.
Fernando. Again please read carefully what I wrote. You are answering post#28 where I clearly talk about an (hypothetical) situation WITHOUT WITHDRAWALS at all. You keep talking about withdrawals, which is fine but is not what I am talking about.
That's 2 completely different discussions.
Growth (TWR) is one thing, it's a generic way to calculate completely independent of providing your trading as a signal or not. Subscribers have nothing to do with it.
A second discussion is what you talked about here. How withdrawals affect volume ratio and profit (and so growth on subscriber's side). Before talking about this, we need to agree on the first point. Do we ?
Fernando. Again please read carefully what I wrote. You are answering post#28 where I clearly talk about an (hypothetical) situation WITHOUT WITHDRAWALS at all. You keep talking about withdrawals, which is fine but is not what I am talking about.
That's 2 completely different discussions.
Growth (TWR) is one thing, it's a generic way to calculate completely independent of providing your trading as a signal or not. Subscribers have nothing to do with it.
A second discussion is what you talked about here. How withdrawals affect volume ratio and profit (and so growth on subscriber's side). Before talking about this, we need to agree on the first point. Do we ?
No, I did not misread your posts. There is a difference between the Subscriber never making withdrawals and the the Provider never making withdrawals.
Even if the subscriber NEVER makes a withdrawal, as soon as the provider does make a withdrawal then it messes things up and the hypothetical growth is then no longer possible.
Just as I replied to the Eleni, I am not saying that the TWR is wrong, I am just saying that it is no longer achievable as soon as the provider makes a withdrawal, even if the subscriber does not, which can make it misleading in those cases.
For those signals where the provider NEVER makes a withdrawal, then TWR is indeed achievable.
Great post!
Growth = Time-Weighted Return (TWR) that measures the performance of an amount invested in the system since inception. TWR measurement is required by the Global Investments Performance Standards published by the CFA Institute.
Profit = Absolute Gain: Return of the investment as a percentage of the total deposits. By definition, new deposits will affect the absolute gain.