Part 2 of 3 of Signal Provider ZuluTrade
In this second lesson about the ZuluTrade Signal Provider we will analyze one of the most important parts for graphical analysis of the Signal Providers’ performance.
We can find it in the “Check My Moves!” section, divided in different Tab. Let’s look at each one of them.
The Profit Tab
It begins, of course, from the graphical representation of what a Signal Provider gained in terms of PIP, that is his Equity Line. Let’s not jump to conclusions, however, because this Equity Line is not the classic one, as you might think.
First thing to say, the trend is considered day to day, so the values are calculated as a summation of all the daily operations. Second, this equity does not show the pips balance evolution for the closed positions only each day.
This is an hybrid Equity Line. Every day the pips accumulated (or lost) with all the closed positions are summed together, and from that value is subtracted the worst drawdown of the entire account on that day, in terms of pips.
To give an example. Let’s suppose a Signal Provider in a day has 10 open trades, and he closes one of them with a profit of 30 pips, while the others remain open. However, during the day some trade went at a loss, and at some point all open trades have brought the account balance to reach a maximum total loss of -100 pips. Well, ZuluTrade will consider the trade closed with 30 pips in profit, and will subtracts the -100 pips value of drawdown that the trader’s account really had to suffer in its worst moment. So: 30 – 100 = -70 pips. For that day the trader’s Equity Line on his personal profile will show a decrease of -70 pips.
Below left you will find 2 buttons. By clicking on Open Trades some circles with a numbers inside will appear on the Equity. Those numbers represent the number of operations simultaneously kept open during those moments of his trading activities that ZuluTrade identified as salient. Critical Events instead will show what were the times when the Signal Provider has traded in conjunction with major world events. By passing over them with the mouse you will be able to know what these events were.
Below these two buttons you have the chance to view the Equity Line filtered only for one or more currency pairs on which the Signal Provider operated, so that you can see graphically the results of the operations for each foreign currency exchange rate, or for a combination of several.
Last point, the time bar on the right, which will remain in a fixed position for virtually all the other tabs in this profile section. By clicking on the different options you can display the data according to the selected period. Obviously, the selected period will be the last recorded, not from the beginning.
1y will be the last year of operations, 6m the last six months of operations, and so on until the last day. Note that, when passing to the next tab, if by chance you should change the time period of this bar, thus updating all the data, you will always be sent back to this Equity tab.
This is for sure one of the more dense tab for what it concerns the level of information that can be found in this profile section.
– Monthly PnL
It starts with the Monthly PnL (Monthly profit and losses). It’s a histogram chart, divided per months, which shows the number of pips earned or lost each month. The orange bar shows the profit or loss for the positions closed only during the month, the blue one instead considers the transactions not yet closed, kept open across one month to the next one (unrealized PnL = profits and losses not materialized).
It means that, if at the stroke of the end of the month, the Signal Provider still had some open positions, the amount of pips of those positions will be shown in the blue column. For example, suppose a Signal Provider has gained 300 pips during the month, and at the stroke of the month he has closed all the operations, except for one, in loss of -300 pips. The chart will show an orange column of 300 pips and a blue instead of -300 pips.
This system has been designed by ZuluTrade to unmask immediately those Signal Provider who had the dangerous habit to never close operations in loss, but if and only they were back in profit. Without the blue column you would find only the always positive orange columns, because with the closed positions the trader was actually earning every month, but you would not see graphically the enormous amount of pips in loss that the Signal Provider is carrying with all the open positions never closed.
With the button below “Include Unrealized PnL” you have the chance to see the chart with two columns, orange and blue, and with the “Closed Trades Only” see only the orange closed trades.
– Trade Volume
Here’s another histogram. In the abscissa axis you always have time, divided by months, on the ordinate, on the other hand you have the number of transactions made by the Signal Provider. With this chart you can not only see how many transactions this trader performs on average every month, if he is constant or not, or if he has changed over time, you can also see how many of these operations, month by month, went into profit, loss, or break-even point.
Each bar in fact is divided according to the three colors. Blue for losses, orange for profits, gray for transactions closed at break even. The amplitude of each color is proportional to the number of operations with respect to the total of the month. In addition, by passing over each columns’ sector you can see the actual number of operations.
– By Pair
Another histogram chart. Along the abscissa axis you can find the currency exchange rates upon which the Signal Provider has worked so far, on the ordinate instead of the amount of pips gained or lost for each currency pair.
Below you can find a pop-up menu that lets you select one or more of these pairs, to see with an Equity Line (this time a classic one) the actual Signal Provider’s profits and losses trend on a particular exchange. This is a great way to figure out where the Signal Provider do his best, and where it suffers a bit more.
This is one of the charts I always like to look very carefully when I visit a Signal Provider’s profile. Along the abscissa axis you can find the time, but this time divided by weeks, while in the ordinates you have the pips.
The chart shows, for each week, the amount of pips of the best closed operation and the amount of pips of the worst drawdown suffered from a transaction. All points of the best trades are joined by an orange line, all points of the worst drawdown are joine by a blue line. Usually the orange line will be completely above zero, but not necessarily, because if by chance a Signal Provider had opened, let’s say, only two operations in that week, and both were at a loss, then inevitably the best operation will still be a trade at a loss, the one that obviously has lost less. But the opposite it’s not the same way. There may be just two closings in one week, both in winning, but being the blue line a joining of the worst drawdown, not of worst closures, the line will still be below zero, always indicating the worst drawdown between the two.
We can say that, in principle, the conformations we prefer are those with constant and rather flat lines, where the blue is very tight and the orange very wide instead. This would be primarily an indication of solid and consistent strategy of the Signal Provider. Second and more importantly, it means that, in principle, the trader is inclined to cut losses early and let his profits run instead, one of the best characteristics you might find in trading.
In this chart you can see the evolution of the Signal Provider’s ranking position over time.
As already mentioned, the ZuluRank ranking, despite the ZuluTrade efforts, is definitely not a reliable model in order to support and strengthen your decisions. In addition, as you will see, there are often really exaggerated shocks in the Signal Provider’s positioning, which are usually recovered almost immediately in the short term.
Although of ranking, however, they are too exaggerated movements, thus demonstrating the unreliability of this tool. However, it may be a good item to satisfy your curiosity and see the history of the Signal Provider.
In the Trading Tab we can analyze pie charts. There are two and can be selected by the 2 buttons at the bottom left.
The first “Pairs” graphically shows the amount of trade carried out by the Signal Provider for each currency pair compared to the total. The bigger the piece of cake, the greater the number of trades executed.
Moving the mouse over it, you can also see the actual number of transactions on that exchange rate. Here you can see graphically what is the preferred Signal Provider’s pairs, if he works homogeneously on different ones, or he’s specialized only on some.
The second one is even more interesting. Time “Trading Timezone” in fact shows when these trades were opened. The operations are grouped according to the four time phases of the market, also called market sessions.
You have the Asian session, involving mainly Japan, China, Australia and New Zealand, there’s the European morning session involving all the countries of the euro area, there’s the American session, which intersects with the afternoon European session, creating the period of maximum trading volume of the day, there is finally the American afternoon session, where volumes fall since in Europe is evening and the markets are closed.
These are the main segments where traders can trade on the basis of their strategy, and obviously based on the country in which they live. It’s interesting to understand how a trader also behave considering this schedule. Some Signal Provider use strategies that include the opening and closing of the transactions during the evening hours, of the European or American session, that is where the volatility and volumes are lower and the risks, in principle, can be minor, as minor of course will also be the pips for each operation. This chart is a great way to understand quickly and clearly where a Signal Provider concentrates his activities.
Here we are at the most important personal profile tab, the tab in which you can start to understand the risk degree that a Signal Provider may have in your portfolio.
We have already seen in the previous Social Trading course what Drawdown is and what its versions and its meanings may be. We will see here only what ZuluTrade shows you in this tab, and in lesson 9 we will discuss in detail what Drawdown can reveal you for your analysis and strategy.
Speaking of the first “Profit” tab we have said that Equity Line was a hybrid between two lines, a classic equity line and a drawdown line. Here, in this tab, you can see the two lines completely separate.
The orange line is a classic Equity Line, which shows ie the balance trend of pips gained or lost for the closed operations only.
The blue line shows instead the pip balance evolution considering the real fluctuations the account has suffered basis on all the transactions kept open during the day, and reporting each day the worst moment of total loss of the account.
Let’s suppose a Signal Provider has accumulated so far a total of 1000 pips, and that in a trading day he closes one of his operations with a profit of 30 pips, while continuing to keep open all the others. Let’s suppose then that during that day, considering all the open transactions on the account, both winning and losing, at a certain point the trader has reached a maximum loss, ie a maximum drawdown, of -100 pips.
Well, on that day the orange line will show an increase of 30 pips, so a point at 1030 pips, while the blue line shows a point at 900 pips, which is the amount of pips the account has actually reached at some point.
The blue line therefore shows the real life of the account, because it considers where the balance really went according to the accumulated losses with open positions each day.
At first glance, with these assumptions, it seems the only interesting line to look at is the blue one. But actually, you will obtain a real benefit by looking at the two lines together and combining their analysis.
We have already seen briefly in the Social Trading course what slippage is.
Slippage is nothing more than the difference between the price at which the Signal Provider’s operation has been executed, and the price at which the investor’s one has been executed instead.
The reasons why this happens are usually two: one, the Signal Provider’s broker and the follower investor’s broker were quoting slightly different prices when the trade has been executed; two, in the passing of time, even if minimal, even if of a few hundredths of second, between the execution of the Signal Provider’s order, and the replica on the follower’s account, the price has changed, therefore the follower’s broker cannot guarantee the same price the trader had, but only the current one.
These differences may of course be positive or negative, and you will notice it when you’ll have to control whether your trades have been replicated well. To create this chart, ZuluTrade considers all the times when slippage has been to the disadvantage of the follower investor, and it shows the average of these values for each broker.
You won’t always find all brokers for each Signal Provider, in fact, only if a user has replicated the signals with a real account, ZuluTrade can analyze the slippage level for that particular broker. Therefore, if a Signal Provider didn’t have live follower investors following him, you won’t find any slippage levels to analyze; if instead there had been or there are currently linked live accounts, you will find only the statistics for those broker who, let’s say, have been “in contact” with that Signal Provider.
Obviously, the lower the level of slippage, the better the quality of the signals replication for that trader, and the more uniform with his your performance will be.
As you may have the occasion to notice when you will control the slippage in a Signal Provider’s profile, among the first positions, if not always the first, there is the broker AAAFX, a company owned by ZuluTrade itself.