How to conduct a qualitative analysis of forex trading signals and choose the best one?
introduction. What to do if you can’t trade myself?
anyone who even once tried to enter the market and made at least one transaction, did so on the basis of a background. We want to earn money or, at least, determine whether you can do it at least in theory. Trade simply for love of the game “not only everything” (), because it requires a permanent and serious costs. The realities of life are such that hardly anybody is obtained immediately “put” and begin to show a positive result at the manageable time warp. To start you have received, you need a combination of four major factors. This Knowledge, Money, hard work, and favourable ambient conditions. If you do run out of at least one of them, the chances of success will be nullified. That is why, before the development of any serious case (and what could be worse than increasing money?) make sure you have all these four components.
someone loses money and goes (to return), someone goes in okolorynochno-service industry, and someone tries to find someone who could really show the results to which he aspired himself, but for whatever reasons, has not reached. The goal with this persecuted variety. One wants to understand why it did not work with him, but it turned out the other. The other comes to thinking: why would I worry myself, if you can just take and hook its wagon to someone more successful and run with it in the same direction. So much so that the speed of this movement, you can ask yourself. The main thing is that “leading” ran in the right direction, and the most important thing is stable and not tripping over.
today, market development industry has reached a level where virtually any, even a couple of hundred dollars, can join the exciting world of financial markets and proudly call myself an investor. For example, you can buy shares and other securities. You can hire a personal Manager. Any of these approaches has both its positive and negative sides. Financial success always consists of two main factors-the correct choice of assets and proper management of these assets. And if one of these factors is implemented at the lowest level, then succeed extremely problematic, even if the second is very high. Only the symbiosis of the right assets and competent management gives us what we want, namely, to increase our funds on a long-term basis.
briefly consider choosing the right assets (and on this subject written by a huge number of pieces), you can highlight the key points that characterize them is liquidity, volatility and the reliability of the issuer. If the chosen asset has all the listed qualifications, you can go to question management. At the moment of the whole myriad of “correct” out of competition are those which are issued by the State. This currency, government bonds and shares of State or, in extreme cases, governmental companies. And of course, alone in this list are the currency, as the correct asset. It is for this reason that they have the biggest liquidity and volatility.
we are all reasonable people, and must understand that money can be earned only where they apply. Where they do not exist and market liquidity is extremely low, the chances a little (here I’m talking about system success, rather than a one-off). Accordingly, the majority of investors and managers attract the most liquidity and volatile markets.
with the assets we have, now.
Search the horse depends. Service “Signals”
As noted above, the most appropriate assets is currency, possessing the highest liquidity, volatility and reliability, besides 12:00 am traded per day. It would therefore be logical to exhaustively focus on trading currencies. How to do it yourself, we won’t discuss. Turn better in the question of how to choose someone who can do it much better than ourselves.
today there are quite a lot of services where successful managers offer the less fortunate or more lazy traders with their services. This phenomenon is called “social trading”. There are in this market and paid and free listings. Moreover, we must bear in mind that not all paid services actually cost spent on them for money, and some free-on the contrary, could compete on their indicators with pay. Therefore, we will not be scorned from free signals and analyze them on par with the pay of top rankings. On this site already have published several articles about how to choose appropriate signals. Contrary to the approach outlined in this article will be that we will use advanced options for evaluation, which are not included in the “standard delivery” and the calculation of the rankings.
use this specially developed the script that these missing parameters we give.
I am not much mistaken, supposing that the vast majority of subscribers when selecting a signal only pays attention to three (on the surface) of the parameter called the three “p” ‘. This Increase, subscribers and drawdown of. Of course, the Bills with negative growth we fundamentally do not consider, though, by and large, they deserve separate study on How trade is not worthwhile. “and here are the ones who passed the initial filter, need to be further and closer study. But before you decide to subscribe to the signal, we must give full consideration to the many signals and figuring out the main thing — how was formed the profit shown in the report? this eventually will lead to what you cultivate its own method of signal analysis and selection.
many would argue that the money does not smell and does not matter, as their signal provider earned, because balance is growing. I categorically disagree. Profits should be earned correctly, otherwise there is a high probability of failure could wipe out the entire previous success. And I rather give preference to the manager who trades not too profitable percentage, but correctly in terms of the realization of transactions. If you care about the absolute profit, you can easily build, increasing the volume of transactions or the actual leverage respectively, taking on additional risk.
as is well known, the results shown in the past, cannot guarantee their repetition in the future, but we know that it is legal, at least, does not raise questions of law. Hence, the correct management approaches will not cause issues by qualified investors, which will analyze statistics on signal and make a decision on the subscription.
Surely among those who read the article up to this point, already raised the question of what proper management. Start with a little analogy: proper bricklaying is when the walls are obtained not only smooth, but solid. And here the very important role played by the geometry and the quality of the bricks. Even if you’re a bricklayer level 80, but brick crumbles in your hands or it is uneven, the desired result will not. In our case, the role of brick perform transactions. In other words, managing, which works correctly, should make the perfect deal. If talking even easier, we need a manager’s perfect primary result — the equivalent of quality bricks from which we will erect their structures “. Preferential distribution of deals towards ideal gives us a high degree of confidence that the probability of failure is minimal.
so, we gradually came to the notion of transactions. Not to speculate further into the conditional tense with the prefix “‘” will introduce some basic limitations. First, we will consider only those events that occurred between the time of the opening of the transaction and the time of its closure. The second is what happened before the opening or after the closing date (e.g. price passed 100500 points after closing, which we missed), will be taken into account only as a comment that could be taken into account, and can be ignored. On the basis of the foregoing, the perfect deal is deal that once went into profit and was closed on the Take. that is in the deal for the time of her life has been completely worked out the entire course of prices, while not carrying major risks for the investor, losing most of the time zone.
of course, in the life of the ideal deal happen, so this definition we have kind of a benchmark against which we will evaluate the quality of all other transactions. And if the signal distribution of most transactions close to the ideal, then, is the message that we are looking for.
otrabotavshuju Any transaction can be assessed by two basic parameters — quality of and the quality of output.
Quality suggests that the deal during his life not carried serious risks, i.e. for the most part been in profit. the quality of output describes the percentage of profit that documented in relation to the maximum theoretically possible for the period of the life of the deal. These parameters give the quality score of the transaction as a whole. Quantify these two indicators can be expressed in the following formula.
quality of K (In) = 1/(1 + MAE/Result)
the quality of output K (Out) = Result/MFE
Result is the result of the transaction.
MFE — the maximum profit.
MAX(E) -Maximum unrealized loss.
and the composite indicator K (Deal) = K (In) + K (Out)
as you know, the perfect deal this parameter is 2. All other transactions must strive for this.
the following indicator — transactions comfort for investors. What is comfort, each determines for himself, but for an investor who invests his money in virtual project manager, this is not an empty phrase. Many who trust their hard-earned, certainly pointed out strange and uncomfortable feeling when open positions pretty long hang out in the negative zone with a tendency to increase further loss. In other words, with this creepy discomfort. So comfort is the feeling, the opposite of discomfort when you look at the equity in your account and see that it is more than the balance. In such moments, you may even experience happiness and a feeling that life was a success, and gold mine found. All these arguments I am exactly from the perspective of the investor and, most likely, they don’t really enjoy Manager. However, if the manager wants to be popular among investors with an eye on long-term cooperation, he simply must take into account these peculiarities of normal human psyche.
so, we gently approached the question of how to quantitatively consider such subjective option like the comfort of the deal? Here the key factor is not the price and time. We need to calculate the time to the total transaction lifetime it was in profit or lose out. The longer the deal unprofitable holds in the zone, the less comfortable this situation for investors and vice versa.
To appreciate it, you need to analyze a deal on minute timeframe. No matter what time frame trades Manager, minute scale is the minimum for Mt4, and only we can get the most detailed picture.
At time life deals highlighted by two vertical lines. Also marked opening level of transaction and the time of its closure. Further calculations, we will maintain the level of open transactions. As you can see from the picture, there are a number of bars (see gray rectangles), fully formed below the opening transactions on purchase. For them price High < OpenPrice. Также мы видим бары, полностью сформированные выше уровня открытия сделки, у них цена Low > OpenPrice. The first type of bars maximum diskofmorten for investors because all the time the formation of bar deal was in a loss. The second type of bars clearly comfortable, because their time was observed floating profit.
to enter a quantified, take the following conditions. Comfortable bars would have the value “1” uncomfortable ” -1″. Bars that are formed around the opening price (Low < OpenPrice, а High > OpenPrice) will have “0”.
further believe the ratio of “comfortable” or profitable bars to “uncomfortable” or unprofitable bars according to the following formula:
K (Comfort) = (ProfitBars/TotalBars)-(LossBars/TotalBars)
ProfitBars The number of bars that are fully formed in the lucrative area.
LossBars is the number of bars that are fully formed in unprofitable areas.
TotalBars is the total number of bars over the life of the deal.
for transactions, opened and closed within one minute, immediately accept this indicator set to “1”, because position holding time was extremely small, that is, an investor simply does not have time to get scared.
this option will have a range of values from the ” -1″ to “+1”: from the comfortable to the discomfortable.
so we got two parameters that characterize the quality of the transaction and its comfort from the investor’s point of view. Now is the time to consider them as a whole as a single trading process.
. unprofitable trades I didn’t see, because our goal is to understand the factors that generate profits. Losses to perceive as a necessary evil and appreciate only in General and in proportion to the profits. By and large, in-depth analysis of the losing trades is a signal provider’s area of responsibility in order to improve the quality of their trade.
Script for retrieving the source data was developed by the script. How it works is the following: it analyzes data on deals that are available to a potential subscriber signal “means” tab on the page of the signal Provider, called “history”. History file can free download *.csv
you will need to click on the “history” link and save the file.
script reads the following parameters of the deals:
-date/time opening transactions
-close price transactions
Then on these parameters it tries to reproduce all the transactions on the quotes, which provides my broker. If the price of opening or closing transactions do not fall within the range of historical quotes, then the transaction is marked as “Incorrect opening or closing price” and in further calculations. In the course of work also had to face the challenge of time synchronization of quotations from different brokers. As it turned out, his own time shift from GMT is striving to establish unlikely to each broker.
talk about with regard to the discrepancies. I used Terminal from the company “.” with a real trading server S … All options transactions are compared it is for quotes from this server. That result? After processing the data ranking for MT4 accounts of 5 signals, jitter on quotes between trading servers providers and server my broker ranged from 27.3% to 99.6% of the total number of profitable trades. I found a pretty big setting possible slippage equal to 50 (!) points (5-mark). This option allows you to specify the range of possible divergence of prices from different brokers, to accommodate more transactions.
When this whole story minute bars I in advance not only uploaded, but rewrite to eliminate the maximum availability of “broken” bars in price ranges.
to illustrate the differences, consider the per trade, which is highlighted in the figure.
the discrepancies were kind of like the figure below.
Here the vertical dashed lines is the moments of opening and closing the deal, the price tags are transaction prices on the master account. And now compare that picture with the prices that were on my schedule. Opening transaction normal, almost at the same price, but there are questions to close. And if those transactions very much from the total number, the subscription to such a signal does not bring you nothing but headaches and loss.
the figure below shows the result of the script on the chart. Calculated a table of values for graphing and percentage distributions matching quotes-82.66%. Of the indicators shows that 56 options transactions not invested in the price series of quotes provided by my broker, even when using slip.
what you can do?
. All that glitters isn’t gold. If, for the most part, deals with such large discrepancies, then the use of this signal for a subscription is fraught with negative consequences.
the second. to avoid such discrepancies, some recommend opening an account with the same broker as the master account. But what do I do if I am satisfied with my broker and I do not totally trust different? The most logical — pay attention mainly to signals that are broadcast from the same server as your quotes. The second way is to look for such signals, which have minimal disagreement with you.
to show this more clearly, here are a few diagrams of distributions. For the original data was based on the history of transactions leaders (top 5) official rankings (at the time of this writing), among the signals for MT4.
# 1 rankings. 129797 signal ID.
From 1563 profitable trades successfully processed 1557 (99.6%). This means pretty high line quotes between the trading server provider and server my broker. 0.4% transactions is divergencies on prices, an example which was described above That. respect to the distribution chart for quality bargains, you will see that most of the deals has a fairly high quality, “hump” distribution “accounted for 1.3-1.4”, which is close to the normal average level. And here is the superior distribution deals personally, I am absolutely not satisfied because there are quite a large number of transactions that were unprofitable for a long time zone. This Manager absolutely does not regret the nerves of their subscribers. Besides “hump” distribution shifted to the left, which is not very good.
No. 2 ranking. The signal ID 129369.
From 1900 profitable trades successfully processed 745 (39%). We are witnessing very low compliance rate quotations, so this signal to me is absolutely not suited. But if you look at the chart distribution deals and quality comfort, he shows a very high result. This signal can be recommended to those traders who have with him the minimum divergence on quotations.
# 3 ranking. The signal ID 252114.
From 315 profitable trades successfully processed 268 (85.6%), i.e. quotes matching rate pretty high. Move on to charts distribution. For quality bargains “hump” have to “1.5”. This is above average and is perfectly acceptable. But in distributing comfort deals painting oiled. This may be an indication that the Manager is not clearlyND exit system: part peresizhivaetsja deals, and in part it goes quite comfortably for the Subscriber.
No. 4 ranking. The signal ID 274582.
From 348 profitable trades successfully processed 95 (27.3%), and this is when the slippage in 50 items! Very low compliance rate quotations. Meanwhile, distribution diagrams show higher than average. Mean signal It is quite possible to consider for a subscription provided that it is not such a disastrous divergence in quotes.
# 5 ranking. The signal ID 250456.
From 95 profitable trades successfully processed 93 (97.9%). the rate of conformity quotes very high: “hump” quality distribution deals accounted for 1.6. Is above average. distribution deals on comfort, too, looks pretty good. This signal might well consider to subscribe. Of the shortcomings you can select a very small number of deals closed by TakeProfit.
That you can extract from all this?
of the five signals that make up the top 5 rankings, clearly fit under my terms only 2, one of which is detected the lack of conformity. Of course, when such calculations further into the rankings, could find decent signals. But the farther “into the Woods”, the lower the rates, which means you need to spend a large amount of calculation to find something suitable. And here is absolutely no matter what yield shows the signal: the main thing is that he had the “normal” indicators of quality, superior deals and, of course, minimal and maximal drawdown percentage of profitable trades in history.
as the cherry on the cake to cite processing one quite popular free signal. To me being accused of advertising, I will not lead his ID, but I will say that it is one of the oldest signals in the service (he has more than 150 weeks). Commenting on the results, I think, too, would be redundant, just give the percentage of matching quotes between our servers — it was 71%.
beautiful, what else to say!
As calculated coefficients of the quality and comfort of transactions, I described above. Now is the time to try to make the first conclusions.
first and foremost, you need to pay attention to the compliance rate of quotations between trading server your broker and the server provider. Even if a provider “draws” ideal deal “by a factor of 2”, this does not mean that you have found the Holy Grail. You may not be trivial because it trades on your terminal will be practiced not so as the master account. If the differences are minimal, you can move on to consider other options, including quality and comfort. But first, of course, you have to filter the signals to the common indicators such as Profits, Drawdown, the lifetime of the account, the percentage of profitable trades etc.
If you decide to use signals from the same server as your, be ready, that this signal may be average or even below average.
The difficulties I encountered in the process of analyzing signals from different suppliers?
originally, my goal was to develop a methodology for calculating own ranking signals. According to this technique, I was going to select the most appropriate signals personally under my perception of how should be committed to the transaction. I thought that, given the relatively large number of signals to the Service, this task will not be too difficult without special expenses and I find what I need. But, as the saying goes, life dictates its own realities. These realities were expressed in that there are two things that can complicate the lives of the prospective subscriber. The first is the difference (sometimes significant!) quotes from various brokers, most likely caused by different conditions of trade prices flow filtering servers. The second is a strong contraction of the number of potential signals that not only satisfy the investor on the quality parameters of the deals, but have minimal discrepancy quotes with you. And the greatest difficulty is that a search for “pearls” will have almost manually shoveled tons of information. To admit I was amazed this circumstance, but “you can’t reject what is real” (from).
is very important! To the results of your calculations were correct, pay very close attention to the quality of historical data, downloaded to your computer. Depends on what percentage of transactions will be processed successfully. If there are holes in your story, “the broken bars or simply will not be enough, then your calculations cannot be considered representative. Also pay attention to the “distribution” tab on the page signal. There are listed all the tools on which generated signals. For all these tools you will need to download yourself a quality story.
How to search the desired signal?
to start it is necessary to draw up two lists of potential signals.
first list would include signals, suitable for normal standard criteria, proposed as search parameters. This parameter can be Rated, Drawdown,% profitable trades, lifetime account, etc. Next, using a script by using the other options, the Chief of which is the percentage of matching quotes between the server your broker and the server provider. If the chosen signal passes on parameter matching, analyze quotations on: evaluate the distribution chart of transactions and quality comfort. This procedure will have to be done with each signal, passed an initial filter.
in the second list will include potential signals, which are based on the same server as you. For the selection of such signals need to filter option in the “Search by name, author, Broker:” enter the name of your broker.
then you have a list of signals that are broadcast with your broker’s servers. For greater certainty first analyze those signals, which match the names of your servers, then everyone else and already from this list select potential signals.
Step technology selection signals is as follows:
- creating a list of signals that have passed initial screening.
- creating a list of tools on which dealings on selected signals.
- downloading, but better — rewriting history quotes for these tools.
- file upload transaction history for the selected signals.
- file history Processing transactions using a script.
- the analysis of the results issued by the script.
- the formation of the final list of signals, suitable for subscriptions specifically under your conditions.
as demonstrated by my little study, signals from the top of the official rankings take their well-deserved positions. But unfortunately, not every signal personally I could use with my trading terminal. Change the broker is very troublesome lesson, and not always worth it. Appropriate it looks, when, for example, there is the question of diversification of large sums, not only for individual accounts and signals, but also on various brokers.
What you need to know, not to be excruciatingly painful?
manage risks. Any risk management strategy-diversification and limiting. Don’t put all your capital on one signal. Subscribe to many. And remember: diversification begins with a numeral “3”, i.e., to diversify their risks, you need to allocate their capital at least three parts and each invest in independent asset. The higher the degree of diversification, so much the better.
once the signals are selected, it is necessary to proceed to the next stage — testing in real conditions, but with minimum production speed.
Limit the amount of damages for each part of your capital. If for any part of you left on the loss limit, the stop subscription without regret. And remember: to systematically get the growth of your capital, it is necessary to approach this process systematically.
it is possible, in the work of the script there will be separate bugs that will be fixed, but its primary role at the current moment it performs. The most valuable analysis always is based on primary data processing, those “building blocks” from which eventually result. As a result, we’ve got answers to questions about how, due to which the profit is formed on a given signal, how sistemen approach the provider and what proportion of the results took a chance.
Script laid out in the market, where you can get to know in as much detail as possible with his work by watching a video demonstration. Wishing to discuss the methodology and considerations for choosing signals are welcome in the comments to this article.