We are confident that the vast majority of traders are already familiar with the "Signals" service from the company MetaQuotes,which allows you to copy trading signals on line. Many thousands of these traders have become providers of signals and thousands of others - consumers of the product, in other words, subscribers to them. AND...
And having examined carefully the signals shopping window, having analysed the basic monitoring data and having made a subscription, the trader is all of a sudden surprised to notice that the results in his account and in the provider's account vary greatly, and while the supplier has a stable income, the trader loses steadily his deposit.
Why is this happening? Let's look at some nuances that are not very noticeable at first glance but can have a strong impact on the copying results.
Among the obvious advantages of service "Signals" are:
● embeddedness into MT4 and MT5 platforms, which allows to subscribe to trading signals from the home terminal just in few clicks;
● high level of security for traders and suppliers of signals;
lack of third-party access to their accounts and balance sheets -while subscribing even investor password is not requested;
● absence of any commissions for transactions and absence of spread expansion;
● possibility to use virtual hosting, and trade in fully automatic mode, without even turning on your computer;
● offers a huge selection of signals exceeding 3500;
● low fixed cost of the subscription averaging about $20 dollars a month (regardless of the size of your deposit);
● special system of protecting subscribers from the wrong calculation of the size of lots traded and excessive load on the deposit;
● full transparency of trading history, including around fifty parameters of online monitoring to help the subscriber to select the most profitable signals.
I would like to draw your attention to some of the above mentioned issues, because, despite the seemingly obvious advantages, they also contain a number of pitfalls that can cause serious damage to your deposit.
1. Firstly, it is a fixed price of subscription.
Some social trading platforms make their profit by charging a commission on each transaction or expanding the supplier spreads and if the supplier trades at a broker with a spread of, say, 1.0 points, the same transaction may reach you with the spread of 2.0 points and what it becomes at the time of important news release - generally a closely guarded secret. As for the "Signal" on MT4 and MT5, then there are no secrets, everything is clear and transparent: you pay for subscription and get trading signals exactly, as the supplier. However, please note that in this case the subscription for the same signal can be both profitable and unprofitable. It all depends on the size of your deposit.
Suppose the signal on which you decide to subscribe, shows an average monthly income of 20%, while the cost of subscription is $ 20.
If your trading account deposit is $ 1,000, an increase of 20% would equal $ 200. Subtract the cost of subscription, and it turns out that your monthly income is $ 180, ie, 18% a month. or 216% a year, which, as you will agree, is more than good.
Now imagine that your account has only $ 50. Profit in this case would be $ 10, which, taking into account the subscription price of $ 20, will bring you a loss of $ 10. Thus, in just five months, you do not just reset your deposit, but lose another $ 100 you had paid for the subscription.
2. Another important point, which will also affect the amount of income that you receive. Depending on the size of your deposit, a special system of protecting subscribers from the wrong calculation of the size of traded lots may not allow you to copy the transaction in the same amounts as the at the signal supplier.
For example, if the supplier deposit at the moment is $ 500, and he opens a transaction of 0.1 lots, then, with the deposit on your account of $ 100 the transaction that will open will be 5 times smaller, that is 0.02 lots.
Therefore, in order not to experience frustration, when choosing a supplier it is essential to pay attention to the current balance of the account. The difference in the size of opened transactions will be particularly noticeable if the supplier trades on cent account, and you are going to copy it on a standard dollar account.
3. And one more thing concerning the calculation of the size of lots traded. Getting to the tab "Signals" ("Tools"> "Settings"> "Signals") on your terminal, you can manually set the load percentage on the deposit. And in this case we must also be very careful.
Let's take the same initial data as in claim 1. If your deposit is $ 1,000 and the supplier of signals has the same amount, an increase of 20% is equal to exactly $ 200, since the transaction will be copied in the ratio 1: 1.
And everything is good, but, having examined theprovider's trading history, you see that the maximum drawdown for his account is of, say, 80%. This risk seemed unacceptably high to you, and you have decided to reduce it in half. Make it very simple (and it is also a definite plus of the service) - you set the maximum load for the deposit of not more than 50% in the tab "Signals". Thus, if the provider opens a transaction of 0.1 lot,the transaction on your account will be twice smaller, that is 0.05 lots. But with the risk reduction of risk, it is natural that your profit will decrease as well, which, instead of 216% per annum will now be equal to 108% (which, frankly, is impressive).
But if your account is only $ 50, the picture is quite different. With the double reduction of the maximum load on the deposit the profit will be halved and will be not $ 10 but $ 5 that, taking into account the subscription fee of $ 20, will bring you a loss of $ 15.
There is another very important aspect that affects the success of the trade - it is when you have to choose out of possible 3,500 subscriptions the only one that will bring you a good and stable income. We have repeatedly described how to do this, and, of course, will return to this topic in the future. And meanwhile ...
Happy New Year!