No Win - No Fee, or Monthly Subscription?

[rollingstone]

Trouble is by the time they go belly up, you've lost a fortune trading bad signals and they have racked in a few months worth of subscriptions from don't know how many people, then they just start up another service under a different name and get back on the merry go round ( much like Thaner1 (aka easy).

I have never signed up to any signal services, not even the $550 candyman even though for some reason he thinks he has refused my subscription privately ?

I have been tempted on occasions after looking at some services and have bookmarks to about 2 dozen that I keep an eye on but most of them do not do what I feel is essential i.e

- Update their results daily on their website, give a sensible free trial period, and / or give live calls for a period so potential subscribers can gain confidence.

I'm still really of the opinion that your own system will perform just as well if not better, only real reasons to use a service are a) you are not disciplined enough to follow your own system / trades / money management and you want hand holding, b) youre not prepared or just don't want to put in the time, or c) you haven't got the time and you want a standard set and forget method, and I suppose d) if your trading fails you have someone else to blame.

For anyone with some common sense a lot of the scam sites are easy to spot and avoid.

[trendcatcher]

Bobnat i agree,
My system will produce consistent REALISTIC amounts of pips per month or
i will give an unconditional refund of the entire price if it doesnt at least make the price of the system back in a certain period of time.
if i lease the system to them i will guarentee that the system makes the month lease back with minimal drawdown or they will be refunded the months lease price.
if the system is trading managed funds i will take 0% of the profits if it makes no money during a month
As Harry Truman says"the buck will stop here"
or too put it another way they will make the bucks or i will stop.

[glennki]

To add my 2c worth, there's a factor that I think is used to exploit inexperienced traders, and lure them into paying for what *appears* to be the most lucrative signal_service, frequently resulting in the demise of their account.

And that is the measure of success of these signal_services. Should it be:

• Pips moved per entry and exit? And totalled over a period of time?
• Monetary gain on an account over a period of time?
• Percentage gain on account capital over a period of time?

Well, to all the newbies and experienced traders - there is only one true measure of trading success. And that is the first option - pips gained/lost. (For those who aren't sure - a pip is the smallest measure of a currency pair's move - eg. 0.0001 Euros on EUR/USD pair or 0.01 Yen for the USD/JPY pair)

Claims of monetary gain and % gain are false measures since they do not factor in the leverage, account size and position size that will definitely vary from one trader to the next.

Measuring the number of pips moved (in your favour or against you) is a measure that is independant of the trader's account size, the leverage they use, and the position size that they take. And therefore it is a measure that is independant of the RISK that a trader takes. Adding up the losses and gains each month/quarter and then charting the nett result per month/quarter would indicate the sustainability of the signal_service's success. (You could even plot a moving average through this chart to smooth out the peaks and troughs).

I advise people to keep away from services and sites that claim ludicrous monetary or percentage gains. To coin a phrase: "If it sounds too good to be true, it probably is."

So what is a reasonable nett pip gain to be expected from a respectable signal_service per month? In my opinion, any signal_service that is sustainably returning 500 pips per month (or more) is *exceptionally* good. These are far and few between. Factor that in to your account size, position size per trade, and leverage and you can calculate your own monetary and percentage returns. They will probably be higher than what I expect. But then I have been around the block a few times. I hope my opinion is helpful.

[MickMason]

Hi glennki

I tend to agree, the bottom line has got to be pips.

I was surprised to read "returning 500 pips per month (or more) is *exceptionally* good", you really think so, for an experienced intraday trader (I'm taking it that all $ignal providers should be experienced traders!), across two or three pairs? It's a healthy return but it doesn't sound a lot in the scheme of things, average 20 trading days, trading 2 pairs, works out to around 10 or 15 pips per pair per day, that doesn't sound a lot to me somehow.



Mick

[glennki]

Mick, I think 500 pips per month on a sustainable basis is very, very good where people are trusting their money to someone else, blindly.

A good trader can do better, but it comes down to frequency of trade, and risk exposure. The "live" signal services claim better results, but they often trade when the market is moving really fast, so by the time one gets an SMS or email update, the opportunity has gone, and the risk:reward ratio has turned against you. So you will lose, unless your signals_ are correct FAR more often than they or wrong. I mean, if I could make 90% correct trading decisions, then a risk:reward of greater than 1 would be acceptable, but the spread and the pressure of a margin call ensures that most traders end up at a loss more than in a winning situation.

I believe that someone with exceptional money management could make money flipping a coin. But there aren't too many of those since most people over-leverage themselves.

I'm not sure if you're familiar with the story of Long Term Capital Management, who were going bust to the tune of $1.3Trillion in 98/9 due to approaching margin calls. They had Nobel laureates for finance doing their trade moing, and yet they screwed it up. So the lesson is that we can too (or at least I can). They were on the right side of their trades, if they could just hold out long enough, but they didn't have the capital due to excessive leverage. They had to be bailed out by multiple Wall Street banks injecting MASSIVE funds in 98/9, at the Fed's request, to get them through the turn and back to a winning position. The banks did it with reluctance, but because they knew the fallout would cause them massive losses, and perhaps bankruptcy too. There's a book called "When Genius Failed" that tells the story - it's a brilliant read, and great education on the dreaded margin call and over-leverage.

[MickMason]

Originally Posted by glennki

There's a book called "When Genius Failed" that tells the story - it's a brilliant read, and great education on the dreaded margin call and over-leverage.

That's a book I'll have to get hold of! Nick Leeson is another such story (Barings), although he used some sort of martingale strategy I believe, but if Barings had supported his positions it was shown that the trade would have eventually come good.

Good point about the delay in calls, a few minutes can change the whole scenario, price can be critical for daytraders even down to a pip or two.

This has given me some good ideas for a service, whether I ever put them into practice or not remains to be seen!

Mick

[glennki]

Mick, Do you know of a book that tells the Barings story well?

[bobnat]

The main lessons to be learned from LTCM are

1. The arrogance of intelligence will get you.

2. The limitations of intelligence will get you.

3. The arrogance of success will definitely get you. They treated lots of people very poorly on their way up and when things started going wrong, no one would help them because of their arrogance.

4. As small as the odds may be of something happening, it can still happen. In this case it was a confluence of events that led to increasing correlation of normally uncorrelated instruments. LTCM was in virtually all markets, and their computer modeling had predicted the odds of such a confluence of events occurring to be infinitesimal. Yet, it happened.

5. Meriwether was a gunslinger who finally got gunned down. According to my mentor, who was a trader for Tudor Investment, Meriwether was a glorified dealer, not a trader. His previous shady dealings at Salomon Brothers should have been enough to keep people away, but greed doesn’t pay attention to prudence.

6. Mechanical systems have limitations. Despite watching their fund go down in flames, they continued to follow their mechanical system, believing it would bail them out. This was after losing $1 billion in a day!!

To say they were on the right side of their trades is misleading. We can look at damn near any losing trade and say that if we stayed in long enough we would have won. The fact is they lost billions and billions, including two days of $1 billion per day. That is not close to being on the right side of anything. It was their belief that their trades would turn around that led them to be eviscerated. This is absolutely no different, in any way, from the newbie with a $500 account who just bought Eur at 2800 and it’s on its way to 2200. If only he had more money, he never would have lost his account. As we used to say in Boston, if only my sister had balls she’d be my brother.

Nat