Below is a recent email regarding Forex signal provider selection and the answer – it would interesting to hear if there are any other views

RECENT EMAIL

I would value your opinion on 100_secure_pips_day.  His Max open trades over the last 6 months has been 8, he has low DD, and I have checked all of his individual trades for this year, and his record is second to none.  The only negative is the high NME, but I think that it is a result of his early trading history which required 27 max open trades.  I am more interested in the last 6 months, which has been very impressive.

ANSWER

Thanks very much for that question –much appreciated.

We have evaluated this Forex signal provider as part of the ZuluTrade top 50. The results are not bad. The main area of weakness is in the ROI. You need a NME of $272 to invest in this signal provider who has produced 1 826 pips in the last 3 months. The ROI is therefore 1 826 / $272 = 6.7 pips for every $1 risked. We prefer this figure to be over 10 pips per $1 risked if you look at the new signal provider list.  He also stays in deals for an average of 5 days – bit long if you want your money to work for you. Recent drawdown in the last month were as high as 1600 pips which is also a factor.

If you look at Pelason (26) he produced 2 263 pips in the last 3 months with a NME of $56 giving a ROI of 2263 / $56 = 40 pips per $1 risked. He stays in deals for 18 hours. Believe it or not this is below average. So your money is freed up quicker to invest in other opportunities.

All these figure use historical data, but that is the best we have available to go by  – who knows what the future holds.

I hope this give you some ideas on criteria you can use to select Forex Signal providers

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Point 1

What happens when an investor invests in signal providers with a $10 000 account, is that 60% to 80% of the account is hopefully never used. If the account is reasonably successful or even runs at a small loss it is unlikely that more than $2000 to $4000 will be needed to finance trading activities and margin requirements. So what happens to the other 60% to 80% that is never used? It just gives the warm feeling to know that it is there. It is very likely that the investor will withdraw the investment if the drawdown becomes say 25% and look for a lower risk investment option. So why have a big account if most of it will never be used.

Point 2

Most people think that a margin call is the worst thing in the world and that you lose all your money when you get one. This is partially correct but the one thing that happens when you get a margin call is that the broker cancels all your deals and returns your margin. Sometimes this margin can represent a large chunk of your account – especially if you had many lots open at the same time. So you don’t lose it all you could get as much as 20% of your account back.

Objective of the test

To prove that running smaller accounts more aggressively traded will result in a high return on investment (even if a margin call occurs) – the 1^st account mentioned below is the control account.

The test

1. So instead of testing a $10 000 account you should open 5 x $2 000 demo accounts. Go to http://expert4x.zulutrade.com and click on “Open Account” and open a $ 2 000 demo account by typing $ 2000 in the balance section. Use 100:1 leverage.
2. Then add any 3 signal providers to the first account. Size the lots so that the total NME for the selected signal providers come to $2 000. See below for details of signal providers election and how to calculate the NME for the portfolio.
3. Then add 3 totally different signal providers to the 2^nd account. This time size the deals so that the total NME for the selected signal providers come to $ 3 000.
4. Then add 3 totally different signal providers to the 3rd account. This time size the deals so that the total NME for the selected signal providers come to $ 4 000.
5. Then add 3 totally different signal providers to the 4th account. This time size the deals so that the total NME for the selected signal providers come to $ 5 000.
6. Then add 3 totally different signal providers to the 5th account. This time size the deals so that the total NME for the selected signal providers come to $ 6 000.
7. Leave the accounts for 2 weeks and report the results.

Selection criteria for the signal providers:

• The signal provider must be positive by +500 pips over the last 3 months after taking open deals into account.
• You can only use 1 of the different versions of the same signal provider per account e.g. TANK111, Tank222 etc. So you can use TANK111 for say account 3 and then TANK222 for account 5.
• The signal provider must have maximum open deals of 20 or less in the past 3 months.
• The pips per deal must be 10 or higher

We are specifically leaving the signal provider selection and into which account they will be added to the trader’s judgement as we want a wide range of results.

Once you have opened your demo accounts and set your traders up please notify Mary McArthur that your testing has commenced. Please note that should we not receive a reasonable number of testers for this system by the 12^th of May we may have to open the testing up to our entire client base outside of the club.

Finding Signal providers

Lot sizing your Portfolio to balance the NME amount

Thank you if you are going to join the testing team

Alex du Plooy

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A new Expert4x account just been listed on http://expert4x.zulutrade.com/TradeHistoryIndividual.aspx?pid=89934 as a signal provider

Please note that this account has not been added to the recommended signal provider list yet but can be used at any time.

This “EA” has traded quite well during this last week during it qualifying trading period and is particulary good at controlling losses.

The automated service trades an advanced version of the Good Vibrations system using multi currency hedging techniques and uses an aggressive vibration approach. The service does trade most days of the week and has reasonable goals of 500 pips a month. Due to the multi currency hedging approach there will be up to 8 or more  open trades at any one time. It uses grid trading approach for lots sizing and multi currency hedging approach to limit losses to hopefully below 80 pips per transaction. The maximum loss per transaction is therefore controlled where possible. This “EA” signal provider service may not trade on Fridays depending on weather conditions at the time

Regretably the “EA ” driving this service is unfortunately not available for purchase or to Good Vibrations clients.

Use conservative 1 microlot settings until you are confident with the service.

If you do not have a demo or real account to link to this service you can get one by going to the link below and clicking on Open Account.

http://expert4x.ZuluTrade.com

Linking to this service is free

.

Please note that lotsizing is used to create an improved Return on Investment on this account only. Zulutrade however does not allow for flexible lotsizing. When linking through Zulutrade lots sizing is fixed. Therefore do not get distracted by the flexible lot sizing used . As a ZuluTrade investor you should focus on the pip production as that it what will determine your income.

The low needed Minimum Equity requirement is encouraging at this stage.

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Some club members have reported duplication of transactions and unclosed transaction during this period. These unclosed transactions are very dangerous as they could result in huge losses on your account due to invalid stops or target. Unfortunately the ZuluTrade system is not perfect and these things happen due to technical (linking) and human error (mainly signal provider).

The process to avoid this is to

1. Review all you open transactions daily (see below how you can do this)
2. Correct the error (See below)
3. Find out why the errors have occurred with reference to your error log which can be found in your account under HISTORY in the “Trade history log” option
4. Communicate the error to ZuluTrade and enquire about possible solutions and / or  Communicate with your service provider if it is something caused by him / her.

REVIEW YOUR OPEN TRANSACTIONS DAILY

Go to POSITIONS in your account and click on the “By signal provider” option. You see all your transactions by signal provider. Then click on The Signal providers name.

You will be taken to the signal providers statistics page on ZuluTrade. Scrole to the bottom of the page and click on OPEN POSITIONS. All the open positions for this trader will be displayed. Note for this example there are 2 open positions on our linked forex account and none on the signal provider’s account. Please bear in mind transactions take 30 minutes to appear on the signal providers account but they appear on your account immediately. So identify those. In this example the most recent transaction was entered into in the last 30 minutes so that is not a problem. The first one is a proble and needs to be closed on the trading account.

REMOVE PROBLEM TRANSACTIONS

Go back to your account (Back Arrow) and close the problem transaction by clicking on the close button

The problem transaction has now been removed

FIND THE REASON FOR THE PROBLEM

Go to the HISTORY Tab and click on “Trade History Log” – you will be presented with transaction error and reasons why they had happened. In this case it looks like the signal provider moved their stop too close (8 pips) to the current price causeing the stop to be invalid.

PREVENT FUTURE PROBLEMS

In this case the signal provider is to blame – communicate this to him / her so that the problem does not re-occur.

http://expert-4x.com/communicate-with-your-forex-linked-account-signal-provider

If it was not the Forex linked account service provider’s fault you may have to contact Support ant ZuluTrade who may be able to assist or explain what happened.

WHEN YOU HAVE COMPLETED THE ABOVE IT WILL bE A GOOD IDEA TO REPORT YOU LINKED FOREX ACCOUNT PROBLEM AND THE SOLUTION TO CLUB MEMBERS ON THE FORUM