The benefits, as well as the flaws, of the signal copying service are obvious to all.
The main advantages include the ability to trade successfully in the Forex market. This applies even to those people who lack either the experience or simply the spare time for this. The main drawback, however is the difficulty in selecting a signal appropriate for bringing a stable income over a long period of time, instead of leading to a complete loss of the deposit.
The leading NordFX analyst John Gordon has been discussing methods of selecting high-quality signals for several years now, doing this using the example of the eponymous service integrated in MT4 and MT5 terminals.
“The good thing about this service,” says John Gordon “is that it provides the potential investor with the most complete statistical information on each of the signals offered for subscription. The existence of over 50 parameters of online monitoring means that there is more than enough to allow you to objectively evaluate the signal and weigh up any potential returns and risks.
As practice shows, the first thing at which an unsophisticated investor looks is profit. It is not too rare that such investors make their choice based entirely on this criterion. Naturally, the prospect of increasing one's capital by 200% in just one month is beyond exciting. It is, however, useful to also consider a parameter known as the drawdown of the deposit - it often turns out that it exceeds 70-80%. Thus, the risk of capital loss in such a case is very high.
There is another option that comes into play at the very beginning of trading activity when the capital is small and the signal supplier is not afraid to take risks. The supplier, as they say, ‘accelerates the deposit’. Later, however, not wanting to lose earnings, the supplier gradually begins to reduce the aggressiveness of trade, consequently lowering profitability.
For example, let us consider just one signal, FOREXLOOPS POWER. During the subscription period, the profit it delivered was 278% in October 2016, 103% in November and 20% in December. In total, in 3 months the deposit growth amounted to 670%,
Observing this impressive result, the investor takes up the subscription from 1 January 2017 and expects comparable earnings in the first quarter. In January-February, however, the growth rate is 29% and 36% respectively, with the first week of March yielding about 3%. So, the investor will, most likely, receive less than 100% profits for that quarter. This, of course, is fine, although it is seven times below expectations.
Here is another signal for comparison: New York City Capital. It shows stable trading over the course of 2 years, giving a monthly growth of 15-20% with a maximum drawdown of only 9%. Looking at these statistics, the investor now has a clear idea of what they can expect.
Here, we can add the number of investors who have already subscribed to a signal to our selection criteria. Thus, the aforementioned FOREXLOOPS POWER has 95 subscribers with a total capital of USD 260 thousand, whilst the number of followers of New York City Capital is 10 times more: 998 people have invested 4.1 million USD in this signal. This figure is self-explanatory.
- ‘Festina lente,’ or ‘hurry slowly’ (Latin): this is amongst the favourite phrases of the Roman Empire founder, Octavian Augustus, and has been repeatedly proven right over the past millennium. “Therefore,’ - continues John Gordon – “in addition to the above, I advise to pay attention to such parameters as signal lifespan. As you can imagine, the longer the signal lives for, the less the likelihood of loss of your deposit. Here, one should not under any circumstances succumb to the temptation of large numbers. For example, ‘TheKing ‘signal had delivered a 324% profit for the first 4 weeks of its existence. By the fifth week, the yield curve had steeply dived down, showing a loss of 100%.
For the sake of clarity, here are some statistics that I put together based on the mql5.com portal data. The number of signals with a lifespan up to six months, presented there, is 3220. The number of those with a lifespan of beyond six months to a year is 840. Those with a lifespan of one or two years numbered 460, whilst those with a lifespan of two to three years amounted to 140. Only 40 signals are currently older than three years, the ‘oldest’ being Pouis main account. This has lived for seven and a half years, bringing about 1200% profit to its subscribers, in other words an average of about 70% per annum.
“The above statistics,” sums up the NordFX leading analyst, “show that just 8.5% signals survive until their third birthday, with 70% disappearing into oblivion without having existed for even six months. This is because most traders are eager to get rich as quickly as possible. One ought, however, to get rich slowly, albeit steadily. The "Signals" service enables you to do so, as long as you use it mindfully.