Finding a reliable trader to handle some of your risk capital can be a great way to diversify your income. If we are all being honest, trading is not all funds and games.
When you are on a losing streak, it can seem like forever.
It can be a real grind.
Having someone else trade for you can take some weight off your shoulders. It's nice to wake up and have this kind of MT4 alert on your phone (no matter how small the dollar amount).
However, if you have been reading this blog for awhile, you know that I am very much against the mass market Expert Advisors (EA) out there. Everyone wants to find the best Forex EA (Expert Advisor), but many times they are searching in vain.
More on why in a bit…
But that doesn’t mean that I’m totally against automated trading, trade copiers or managed accounts. After all, if you had the opportunity, wouldn’t you love to have had some money with George Soros or Ed Seykota when they first started their funds?
Of course, finding these traders isn't easy though.
I haven’t liked any of the offerings on the market…until now. This post will also show you the one provider that I do like and why.
Keep in mind, just like real trading, this is NOT a get rich quick deal. If you do your due diligence correctly, your money will be made through compounding over the long term.
There are no free lunches.
Disclosure: Past trading performance does not predict future returns. Forex trading is risky and you could lose all of your money.
Let's start with why I don't like most of the offerings on the market. I hope my personal experience will help keep you from making some bad decisions.
My Experience with Forex Expert Advisors
I have two personal experiences with Forex EAs that I want to share. One happened to me and one happened to my buddy.
My First Expert Advisor
Here is my experience with MT4 Forex EAs and what you should consider…
One of the experiments that I tried on this blog, back in the day, was with a well-known EA called FAPTurbo.
I have since taken those posts down because I don’t want to give anyone the impression that I am promoting that product. At the time, I thought that it would be a good experiment to see how well these trading robots really did.
The test was simple…open a real money account, turn on the EA and let it rip.
Go surfing and make money, right?
It actually didn’t work out too well.
Oh, I was profitable at the end of the experiment.
But there were two major things that bothered me.
Frequent Trading System Updates
First, they came out with an “update” almost every month that would recommend that I tweak the settings. I also had a choice of settings that I could use, if I wanted to be more “conservative” or “aggressive.”
If I’m paying for an automated trading system, I want to be sure that it is relatively stable. Sure, there should be updates, but not every month. By continuously changing the parameters, that tells me that they are totally curve fitting.
In addition, if I don’t know anything about how the system works, why the hell am I choosing the settings?
That scared me.
Do They Really Understand Trading?
Which brings me to point number two. In most cases, you never really know who the “genius” is behind the EA. In my opinion, you need to trust the system developer even more than the system.
Who knows how serious the system developer is about trading.
Is this just a hobby for them?
Will they get bored one day and stop tracking the performance of the EA?
Will they leave you hanging?
In my experience, typical EA creators are people who are really good programmers (or work with good programmers), but don’t understand how trading really works.
They backtest the crap out of a system and it looks good on paper, but it doesn't work in real life. There can be several reasons for this, but it usually comes down to one or more of the following:
- The demo account they tested in wasn't a good representation of live market conditions
- The system relies on precise entries, but there is a lag in live executions
- Big variances in spread/commissions between brokers
- System is only tested over the last few months
There are more, but those are the highlights. I strongly believe that:
If you don’t know how an EA works, how to do you know when it stops working?
I feel rather fortunate that I escaped the experience in the black though.
One of my friends wasn't so lucky…
My Friend and His Retirement Fund
People are always out for a quick buck and most EAs cater to that desire. One of my buddies thought that it would be a good idea to create a “fund of funds” with a handful of EAs and put some of his retirement money behind it.
Since there would be several EAs trading the account, they would give him some diversification and make it less risky.
…or so his logic went.
He did all the research and chose 5 or 6 of the EAs with the best track records. He even took the precaution of trading them in demo for a bit.
It did fine in demo.
But as you might expect…eventually, his “fund” lost most of it's money and he gave up. This just goes to show that you can do all the research in the world and still end up losing money with EAs.
It was kind of sad, but unfortunately, it is actually a pretty common thing. Don't get me wrong, I'm not blaming the EA makers.
It was totally my buddy's fault for taking that risk and accepted that fact too.
…and there are some great EAs out there. But they usually won't be found in a Google search and be offered for $149.
You probably have had at least some experience with a mutual fund or something similar. As you have most likely seen from market downturns, mutual funds can be just as risky as individual stocks.
It all depends on the fund manager and how they handle the risk. Choosing the right fund really boils down to your risk tolerance, knowing the track record of the fund…and trusting the fund manager.
I don't have too much to say on this topic because most of the “trusting the trader” part was covered in the EA section above. However, I just want to reiterate that you really need to get to know the trader behind the fund.
…or at least have a very good feel for how they trade.
There are great money managers and there are terrible traders. It is your job to seek out the best traders that align with your financial goals.
Finally, let's talk about trade copying services. These services take the trades from traders around the world and copy them into your account, for a monthly fee.
The trader can have a discretionary system, or they can use their own EA. Trades copied into your account usually mirror the risk that they trader is taking in his/her account.
I think that this model is amazing because it gives people from around the world the opportunity to create an income stream without going through the traditional overhead of setting up a fund. A true reward of trading talent.
But it also opens up a whole new envelope of glitter (Google it).
Again, you come back to the million dollar question: can I trust the trader behind the signals?
I have actually been looking around for something for quite some time. I wanted to find a signal that would diversify my trading a little. I’m happy to say that my research has finally paid off.
Actually, that’s not right…
The Value of My Network
My network has paid off…big time. That is one of the most valuable things I have built by starting this blog.
One of the traders that I interviewed back in the day, told me about his new signal service. His name is Rudy and although he is not officially on the Podcast, I feel that his interview is one of the best interviews on this site.
If you haven't read it yet, go and check it out.
You see, I don't keep in touch with everyone I interview. But Rudy is someone that I have kept in touch with, simply because he is a cool guy, I genuinely enjoy talking with him and he always has some fun projects going on.
We are also friends on Facebook and I have kept up with his trading since the interview. He periodically posts his trading results and they are amazing.
I'm not at liberty to discuss exact numbers, but he is a trader who goes for consistency. So he won't necessarily make 200% in a month, but he knows how to create a pretty steady monthly return.
Anyway, so that is why I trust him as a trader and a person. So when he came to me with this new trade copier / signal service, I was all ears.
He then introduced me to the guys he was working with. They manage the backend stuff so Rudy can do his trading.
I liked the team and the site right away. The thing that I liked the most about their website is that they post the verified real-time performance of all of their signals.
My Real Money Experience
— Hugh Kimura (@TradingHeroes) August 6, 2015
But liking someone and trusting them are two different things. So in order see how well things really worked, I decided to put up my own money and start trading with them.
The trades that you see in my Twitter account are trades from that live account. It has been about two months and I am very happy with the results.
As of this post, I am currently up 5.68%.
Again, not huge gains, but not a lot of risk either.
I have been watching how the signal trades and I really like it. If you want to see all of their signals, visit their Forex signals page.
Disclosure: I do get a commission for all business that I send to Back Bay Markets and my monthly fee has been waived. But I only recommend trading products and services that I use personally and believe in and this is one of them.
Things to Keep in Mind With Forex Signals
There are two things to keep in mind if you are interested in Back Bay Markets Forex signals, or any signal, for that matter.
Be Aware of the Monthly Fees
First, these Forex trading signals have a monthly fee, that is standard for professional services. Therefore, you need to have enough money in your account to make up for the fee.
For example, Back Bay charges $59 per month for the Omega Genesis signal…which I am using. The minimum account balance is $2,500.
Here is the monthly performance for the year.
You would have lost money in May, no matter how much you had in your account. However, it is the marginal months that you have to consider.
Let's say that you want to be net profitable (by at least $1) in any month that has a 1% gain or more.
So if we do some calculus…
X (minimum account balance) * 0.01 – $59 = $1
Solving for X…
We get: $6,000
Therefore, if you have $6K in your account, you would have only lost money in April, May and August…when the return was less than 1%.
…and you would be doing quite well overall 🙂
Just something to keep in mind.
Not For US Citizens
Second, most signals are not open to US citizens. This is because US regulations state that signal providers must be registered in the US, in order to accept US citizens.
Well the registration process is crazy expensive and has a ton of administrative overhead. With the small fees that these services charge, it doesn't make good business sense to register, just to accept US clients.
They will either break even or lose money if they have to keep up with all the regulations. I was allowed to have an account for marketing purposes and because I am friends with Rudy.
Just a few things to keep in mind if when you are looking at Forex signals.
So if you are looking for an EA, managed account or Forex signal, I hope that this post will help you choose the one that is right for you.
The bottom line is that you have to be comfortable with the trader first, the trading method second.
At least that is my opinion.
If you are looking at an EA or a trade copier service, then take the time to email the provider. Get the trader on a Skype call, if you can.
Follow the service for a couple of months. Find out the benefits and drawbacks of their trading system.
Anything you can do to get in touch with them, will help tremendously. Also, do some simple Google searches online to see if you can find their contact information.
How have you found rockstar EAs, fund managers or trade copiers? Let us know in the comments below…