THE AVERAGE MQL5 TRADING SIGNAL AND ITS SUBSCRIBER
When analyzing MQl5 trading signals month after month, sadly, we come to realization that 97% of the analyzed material is as weak as it gets. Typically, analyzed signals involve manipulation with results (read: Choosing Your Signal Provider), unrealistic levels of gains, small deposit values and false promises. Many of our readers have blamed us for being overly critical or even hateful towards these signals, yet, how many of these signals have lived till even the next (monthly) update? - typically, atleast 1/3 of these are gone within 4 weeks. This article will be about these signals, reasons why we have those and what should be changed in order to improve the situation.
Are You aware of pure statistics behind forex industry? - on average, 93% of all retail traders on daily basis lose money. Hey, and guess what - the same individuals, from the same sample, are behind these MQL5 signals. When we stated that 97% of analyzed material is horrible, that' s what we meant here -> from ANALYZED material. We strongly do believe that there is significant part of trading signals that are decent with reasonable money management, however, these signals are neither most-subscribed, neither they are raising interest from our readers. There are various reasons for that, however, we will try to depict all of this in rather concise description:
- Let's be very very clear here -> forex and its related investments have negative mantra - somehow, these are treated as very aggressive and risky. Reasons for that? - brokers and their trading conditions, which involve huge available leverage levels for traders. Traders are being lured in much aggressive positioning, which almost inevitably leads to messed up money management;
- Trading in general is extremely hard, whatever is the chart You are analyzing - stocks/bonds/currencies -, whatever. Unfortunately, due to freely available (leveraged) capital in forex market, most of new and inexperienced traders start (and fail) in this particular market, which results in previously mentioned statistics;
- Due to surrounding negativity and pessimism, large investors tend to stay away from forex investments, including those offered by MQL5. Manipulative history results and empty promises are not enough to persuade well-educated and reasonably financed individuals to take on venture with some trading signal, that could very easily be washed out by tomorrow.
Stop here for a while and think - if large fish are not being drawn in, what are we talking about here?
- Based on all the previously said, the thing that sways away most of forex traders is incorrect usage of capital, right? When we start with generally lower capital than it should be required, we aim for higher relative gains, unconsciously increasing the risks. Like in any other profession, our background should not influence our capabilities to deliver the task, right? At the end of the day, a positive-minded trader wants to earn as much as his colleague as both are working 10 hours per day, although he is working with 5x of less capital than the other guy - what' s wrong in that? - Well, everything...
- Those with knowledge and understanding about investments will always emphasize relative returns (% gain) rather than absolute values ($$$ values). Forex and everything previously described is somewhat different - due to super-scarce starting capital, usually, too much emphasis is being put on dollar-values. And when we talk about scarcity of capital, we don't talk about just those " awful traders" - we talk about investors as well and their demand for such services;
Check this picture:
Frozen lake -> MQl5 platform;
Ice fishers -> MQL5 trading signals; occasionally, some of them break in and vanish, but who cares, as long as we have those handful of guys standing tall and catching some of those fishes, right?
Fishes -> well, as discussed previously, not the large investors, those are fully aware that the average fisherman on the lake is as dumb as it gets; we are left with all the small fishes, that are drowning on their own due to lack of food (capital) so why not to try to take one or another worm?
- The average subscriber has the same capital problems as the average forex trader has. Not only that, the average subscriber needs to cover the costs of VPS and subscription fees, resulting in at least 40-50 USD per month. Most of our readers would say that capital size of 1000 USD would be enough for them to consider investing -> let' s play a game of maths to understand how bad it gets:
- As a subscriber, on monthly basis You should earn at least 50 USD to cover the costs of subscribing; because You are taking on risks on Your side as well, You would expect to have at least 30 USD on top of that, in total 80 USD, right? - well, if You start with 1000 USD capital, that would mean... what? - 8% profit per month? sounds reasonable?
- For such a signal service, that would total in 152% cumulative growth through year; tell me, wannabe investors, do You know any mutual fund that would show these types of results? or any particular stock? or any other active and repeatable investment that would bring in such values? - well, we all know the answer to these questions, don't we?
- So what do mutual funds, for example, make on yearly basis? - 10-12%? - if divided on months, that would be a grand total of... 0.9% per month. And this is the point, You, boyz, should get serious about - large fish investors are looking on these investments as the most reasonable and reputable, while You are hunting 10x of that on monthly basis? - is that reasonable or sustainable? should You be shocked when these tremendous investments blow up in Your faces? - hopefully, we are getting to a common answer here.
Investors, here is point about You - are You aware of how bonds work and what are risks, coupon payments? - most of Your chosen signals are bonds that have risks higher than advertised and showed in the past, yet, the coupon payments are insignificant when compared to the real risks.
- Remember the point about some decent signals being left outside the screen? - well, that is very much alive. Like in all businesses, if there is demand, there will be supply (and vice versa). Here, in MQL5, there is a huge demand for aggressive and poorly thought-out signals that ignore the basics of money management. While these signals get a ton of recognition, others, with lower, yet, sustainable returns, and far more efficient trading are being ignored. For these other traders, there is no need to keep up their work if that' s not being evaluated by others, thus, they decide to leave MQl5 platform and join some other where these aspects of trading are recognized (like, Darwinex);
- All in all, we are being stuck in this loop-hole, which brings together unreasonable investors with real lack of capital (=gamblers) and those traders that try to live up to these unrealistic standards. Everyone else is staying away from this lake-fauna, yet, who cares as long as there is the lake, right?
Some of our readers (especially, on investors' side) could get annoyed at this point - we are criticizing a lot, but where is our advice for improvement? - Well, hear these out:
- If You are an investor that looks to earn more than 3-5% per month and hope to receive sustainable and secure service, You are not an investor, You are a gambler. In this case, don't rush to subscribe to anyone -> accumulate the capital and join the party when Your risk tolerance and general idea about investments will be more clear;
- Some may think that changing MQL5 platform to something else will improve anything as somewhere else could be potentially better trading signals offered -> don't bother, capital is Your problem, not individual signals. Even with other platforms, You will have Your indirect costs - as long as those cannot be covered with 3-5% of profit, don't even bother;
- Due to Your unwise investing decisions, money flow is brought to "wrong" signals. In the result, signal providers have higher incentives to create a few more of such signals when the old ones go bust. Remember supply and demand rule, it applies here as well. If everyone would accumulate their funds and invest when they are really ready to go, expectations would be totally different and so would be the supply.
If traders can always adjust to the demand, are the investors the main source of problem? - probably, yes, but certainly not the only problem, it's the fault of all system. Remember, trading in general is risky and messy, for stocks the rate of success is higher, approximately 15-20%, but its still far from perfect. In the result, even if the very best industry professionals were to offer their services, we would still have an enormous part of negative and losing signals. What is more, MQl5 and its management of all this system doesn't make things better by any means. Here are FX SUmo set of changes that should be made ASAP in order to improve the overall quality of signal supply:
- When a trader starts his trading, he is looking for profit to cover his risks, right? - Why don't we have a system in place where a signal owner has to pay 25-30 USD before starting a new signal? - by doing this, signal owners would be less interested to flood the market with 101 bad products; quite an opposite, the signal owner would think twice before offering his services to the masses. Currently, we have some signals that have initial deposit below 20 USD - a joke and nothing else. This would be solved and generate MQL5 new, substantial, stream of income;
- Decrease the % of income that MQL5 takes from signals as time passes -> the longer signal is up and active, the lower the % fee. Currently, it sits at 20% -> our proposition would be to have 20% as a base case for the first 9 months, 15% for the next 9 months, and if signal is up an running after another 9 months, decrease it to 10%. In total, MQL5's revenue stream would not be significantly affected (as there are almost no signals with active subs and 9 months active history) and total net effect from 1.&2. would still be positive for the company. For service providers, this would be another incentive to re-think their money management and longevity of their offered products;
- Restriction of number of signals that providers can register within a particular set of time. There are numerous cases when a signal provider blows his account, and within next 30-60 minutes a new account is being created and signal registered. That should not be tolerated.
All in all, this is the topic not covered by anyone, so once again, we are first to do so. We believe that discussion should be made about all of this and we will start by throwing in our opinion and thoughts about all these questions - hopefully, some part of this will make You think even for a day or two before You forget all of this.:)
As with other topics surrounding investing in forex signal services, we urge You to join our official discussion room in Telegram: https://t.me/joinchat/Hpt7gUyosD5JZw-BFsVN3g
Best of luck,