Myfxbook / Oanda / Zulutrade

Beginner Questions
1

I have been looking at the above sites - fxbook, oanda, zulutrade, and I am amazed at how many people seem to be unsuccessful in their trades in the long run. Many have a good percentage profit for a few months to a year, and then their fortunes fall until they are in the red.

The way I look at it is, if someone has a profitable system, then they would probably be on a ‘copy trading’ website that would allow them to make a little bit of extra money in commissions. So why don’t we see anyone profitable in the long term (a few years?) Surely some of those 5% of traders that we hear of making money, would be there.

And as for these people that have an upward profit curve and then crash, are they basically using some kind of dodgy ‘martingale’ method?

Any thoughts? As it doesn’t inspire confidence in a forex newbie to see so many others fail…

2

They select their trading methods in accordance with their perception of the ranking techniques those sites use (especially Zulutrade), and those are somewhat “crooked parameters” for investors. They know that unless they’re very highly ranked, they won’t get (m)any “followers”. Zulutrade in particular rewards short-term, ultra-high-risk methods involving a huge amount of averaging down (i.e. adding to losing positions) and not closing trades with enormous running losses.

The rankings of traders at Zulutrade are almost terrifying.

I last looked at Zulutrade’s “performance table” 3 weeks ago. At that time, the maximum drawdowns of their top-ranked five traders at the moment were (in this order) 35%, 52%, 48%, 85% and 108%!

Also included in their “top ten” to follow were two traders with drawdowns of 2,000% and 4,000%!

If you input your own search parameters, using their search engine, to try to identify any traders who have been there for 6+ months, have real money accounts and maximum drawdowns under 15%, there’s only [B][U]one[/U][/B] listed (and he’s apparently done a grand total of 4 trades in over a year)!

It’s very much “[I]caveat emptor[/I]”, and that’s putting it mildly … :5:

The sites lend themselves to people with a “shortcut mentality”, I think, at least to some extent. If I’d listed there all the trades from which I’ve made my living over the last year, I wouldn’t really expect to attract any “followers” at all, and have absolutely no interest whatsoever in fiddling about with it. I imagine that I’m far from alone.

That and similar things, including typically a [U]lot[/U] of adding to losing positions. They can have quite a good run with it, sometimes, of course … but eventually they crash and burn.

Those are people trying to earn money from selling signals, not people earning a living from trading (the small proportion at Zulutrade using funded accounts, rather than demo, speaks for itself.)

You can’t draw any valid conclusions from looking at places like that.

With all forms of attempted self-employment/“own businesses” the great majority fail. Forex trading, in particular, because of the ease of access, trading hours, and huge availability of leverage, attracts huge numbers of people with a gambling mentality. They’d treat whatever sort of investing/trading they did as gambling. That’s about them; not about forex. They just happen to choose forex, partly because with forex there are so many scammy companies pretending to be brokers (but actually counterparty market-makers trading against their own clients) and they promote and advertise so heavily that they can find a constant throughput/turnover of victims. The good news is that none of this need be relevant to [B]your[/B] prospects with forex-trading, provided that you start by developing an understanding of the necessary statistical and probabilistic concepts and methods needed for all successful trading. :slight_smile:

3

Hi Lexy,

Thanks for the detailed and informative reply!

Yes I came to a similar conclusion when using the filters on zulutrade. If you DID actually list all your trades over the last year, I would imagine that loads of people would realise that your trading is sensible, and pretty darn good, and I don’t know what the possibilities would be for the risk-free extra income, could be huge, who knows? But perhaps it suits you more not to bother with such sites.

I also read a lot of people on this and other forums talking about ‘blowing accounts’ which seems crazy. If we only risk 1% of our current capital with only one trade open at any time this would be almost impossible, I would have thought. Maybe they don’t stick to this rule.

As regards scammy brokers, I am currently signed up with EXT Capital (recommended) and Finspreads (because of the low price per pip offered.) I hope these are ok?

I have actually been reading your posts on systems which are brilliant, may I say, and I am keen to start my trading. One system I have has a potential risk to reward ratio of less than 1:1, but your posts have gave me confidence that this may not be a barrier. I also believe that it is far better to monitor trades, than to just leave it running with a stop-loss, as I have read some terrible stories that in exceptional circumstances stop-losses have been broken through. Only problem I have is that I cannot give up the day job as yet and so my trading time is limited to 8am -1pm UK time. Do you ever leave your trades ‘unattended?’

Regards,
Dave.

4

Hi Dave,

I don’t use either, I’m afraid, and don’t know.

I think they’re both spreadbetting companies? If (like me) you often use spreadbetting (mostly because it makes the profits tax-free), for what it’s worth, I can recommend CapitalSpreads, if you ever need another one. They’re just “all round good”, decent people to do business with, and won’t close your account for winning regularly because they offset their own net liabilities in underlying markets and aren’t therefore collectively trading against their own clients. As long as you’re not some kind of “ultra-scalper” (which I’m sure you’re not), they don’t mind how much you win, because effectively it isn’t their money you’re winning, unlike the case with most retail forex “brokers” who are actually counterparty market-makers.

You meant “reward-to-risk” of less than 1:1, I think? :wink:

Some of my systems do, too. My main method, which I trade every day, wins me 31 pips per successful trade, but a “full loser” actually costs me 45 pips. I’m completely comfortable with this, though, because “full losses”, fortunately, are very rare. (I did have one “full loss” with it yesterday, actually, but still had a good day overall). As long as you know that the win-rate reliably compensates for the reward-to-risk ratio being under 1:1, I don’t see a problem with this at all.

Not too bad? If you had to choose a 5-hour period to have available for trading, that wouldn’t be a bad one to choose? Miles better than 8.00pm to 1.00am, anyway?! :wink:

I have one little daily system which is “set and forget”, that involves entering a pair of “OCO” trades by buy/sell-stop with predefined TP’s and SL’s at a fixed time of the day, and I can leave those unattended, but everything else I have to watch. That’s easy for me to say, though, because I do relatively quick trades and quite a few of them. In theory my trades can be open for anything from about 5 minutes to 5 hours, but in practice, they’re normally closed within about half an hour: unless I decide to “let my third lot run”, trailing its stop-loss manually, I mostly have only 15-pip targets.

Good luck and good wishes,

Lexy

5

Do you ever leave your trades ‘unattended?’

I still have to do my first trade but I would constantly monitor it. Maybe use an iPhone app to do so.

6

To add to the Zulu discussion, there’s actually a few very good reasons why the top traders on Zulu have the characteristics that they do. It’s almost a “law” in FX.

First of all, if I remember correctly, Zulu compensates you based on size traded(money involved) and volume(number of trades). That is, the more money you have following you, the more you get back per trade. Thus traders are incentivized to trade more to earn more per trade, regardless of trade outcome.

If you want a large trade volume, you’re quite limited to the time frames you trade. You can’t really scale into swing or position trades the way you need to to make money, so you have to day trade or scalp.

Next, the fx market is notoriously well balanced. If you take a random trade with a 10 pip TP and SL (spread/comission not included) you’ll win about 50% of the time. As you increase SL and decrease TP (increase your Risk/Reward ratio), your accuracy becomes better. Your balance in the long run won’t change, but your win rate will. Wow!

Finally, short term prices, specifically in most breakout areas, tend to be revisited. (there was a LOT of work put into this area by a group of traders in some thread floating around). Think about buying in an up trend. As long as you keep your TP small, there is only ONE spot where you trade and die: the absolute top. And of course, as you mentioned, martingale, combined with this strategy, allows you to survive quite long in the market. Long enough to generally (I think) sucker traders on Zulu and make a profit.

I consider Zulu traders a specific kind of trader: They make money by surviving and managing trades long enough to make money from traders using their signals on Zulu, but they don’t actually profit from trading themselves. They always bust eventually. It’s kind of a smart play by them really.

As a final note, I think a lot of people who would benefit from using Zulu as extra income tend to be swing traders. They just don’t generate enough trade volume to make a lot using it. Not to mention people in this group tend to be a little paranoid about their trade ‘secrets’.

7

A truly losing system is no less rare than a winning system. If you have a truly losing system, we can trade the opposite of that system and have a truly winning system.

The vast majority of systems are break-even systems. It is conventional wisdom that most retail traders lose money over the long term but the reason that is true is not because they have chosen a losing system. The vast majority are trading a system that will break even. But because there are costs (spread and fees) a break-even system will lose by simply the amount of the costs. The many retail traders losing more than that are moving from one break-even system to the next and to the next. They trade it until it goes into a serious drawdown and then they bail out of it to go to another break-even system until it goes into a serious drawdown. On all of these, if they would have just stuck with the initial system they would have eventually got back to break-even minus costs.

There is an even bigger reason that traders lose: position size. A truly winning system can be crushed by large position sizes. The expectancy of the system determines the maximum allowable position size. Most traders, even profitable ones, trade systems that do not give you any accurate expectancy (only one given a particular set of back-test data). But there is a simple solution to this problem: trade smaller than the maximum allowable position size. Doing so will reduce profitability but at the same time ensure profitability.

Traders presenting accounts that show tremendous gains in a short period are generally showing performance from a system that was entered into just as it went into a period of outperformance. A misleading trader can put together a couple of accounts that will do the opposite of one another. If one takes big losses, the other takes big gains. Then, they can present the one that had all the gains and hide the one with all the losses. Many of the myfxbook accounts will show that the trader made big gains and then quit. That is because they took a big loss and simply never updated their myfxbook account to show those losses.

There are other ways to trick myfxbook. Someone can withdraw lots of money just before booking a big win to make it look even bigger on the equity curve. Then, just before they book a big loss they can deposit money to make it look small. I like myfxbook. It is a great way to monitor your own trading and talk about it with others, but you have to know what the possibilities are and are not to fully appreciate it. It is also a bit glitchy at times. But like all glitchy apps, they are free so I am not complaining.

-Adrian

9

Those 5% of traders who are successful are making money by trading, and they are not wasting their time with social trading.

10

and also missing in the list Fxmerge, is new service with good plans :rocket: