MetaQuotes Software, the company behind popular platforms MetaTrader 4 and more recently MetaTrader 5, reached out earlier this month to have their new Trading Signals service reviewed. This is a paid review and my unbiased take on the product.
MetaTrader is a standalone trading platform used primarily for trading Forex and also supports Futures, Stocks, and CFDs.
The MetaTrader platform has everything one would expect: trading, charting, technical analysis, etc. The company’s foundation began with MetaQuotes, and over the years has brought them to MetaTrader 5. Hundreds of brokers support the platform, and if you have traded forex before, I assume you already are familiar with MetaTrader.
The software can be downloaded for free, then you simply install it, link your online broker account, and trade. The default setup is with FXCM, a popular forex broker, so if you do not have a broker account, this is the broker they sign you up with (I recommend StockBrokers.com for broker comparisons).
Quick note: I have never personally traded using MetaTrader, this is because I do no trade Forex or Futures, which is the platform’s primary focus. For a list of the trading products and services I use, see my 2013 Trade Tools post.
One of the primary reasons traders use MetaTrader is to build their own automated trading systems. These systems effectively analyze forex quotes or stock quotes and execute trades automatically; a trading robot if you will.
In fact, automated trading is such a big part of MetaTrader that MetaQuotes hosts an Automated Trading Championship each year. Traders build their own systems, enter them in the competition, and the highest return at the end takes the prize. Here are the results from 2012 Championship,
Trading Signals Service
Given the MetaTrader’s community’s focus on automated trading, MetaQuotes recently launched Trading Signals, a social trading / trade mirroring service provided through MetaTrader.
Using Trading Signals for MetaTrader 4 and 5, clients can pay for a system created by a fellow community member and run it thereafter to automatically trade their own accounts.
When browsing the available systems, I found there was little to choose from and the prices varied dramatically. I assume this is because the offering is new. 1 credit is $1.
Now, before becoming euphoric over the idea that you can purchase a system that will automatically trade your way to quick riches, a few key points should be immediately noted:
can be is certainlyis extremely risky. When trading stocks, typically you trade with whatever cash you have in your account or use margin to leverage up 2:1. Forex on the other hand utilizes leverage of up to 500:1.
- Automated trading is rarely a ticket to riches. Just because a system worked in the past does NOT mean it will work in the future. I repeat, past performance is not indicative of future returns.
- Trading systems often used skewed data. If I had access to the weather data of every day for the last 100 years, I am sure with some data mining I could come up with a great stat such as, “On every 3rd Wednesday of the month during leap years in English speaking countries, the weather is sunny 52.63% of the time.” I completely made this up, but the point is that when creating a system, the data can be skewed to show a desired effect.
For example, take a look at this system, Freak, which is currently featured 1st for its five star reviews. The system costs 1139 credits ($1,139) to buy. Note the performance data, because apparently this system turned $1,000 into over $17 million over the course of three years.
If this was the case, and this author, Freak Universe, had created an automated system that could turn $1,000 into millions, then why the heck would he or she sell it at all, let alone for a measly $1,139?
Now, take a look at this Free system, ADXSign. The system has as clear cut formula using a common market sentiment indicator, “Implementation of the Average Directional Movement Index (ADX) indicator described in the book ‘New Concepts in Technical Trading Systems’ by Welles Wilder.”
While I have no idea if this system actually returns profits over the long haul, I have far more initial credibility off the bat for this system since it is using a clear cut formula that I can understand.
My Bottom Line
All in all, the concept of the Trading Signals services makes sense on a macro level: MetaTrader is a platform used by traders to create automated systems for trading forex, futures, etc, so now traders can sell their systems directly to the community and help others make money.
However, just because a trader made a system with a gazillion percent return using historical data, doesn’t mean it will work in the future.
Forex trading is extremely risky business. The reality is that significantly more traders lose money than make money trading over the long haul.
With that said, for those trading Forex and Futures, MetaQuotes has been in the business for over a decade, their platforms MetaTrader 4 and MetaTrader 5 are supported by hundreds of brokers, and thus the platforms are certainly worth a consideration.
And, for traders who have been in the game for a long time, understand the risks, and understand how automated trading systems work, not too mention how to select winners, Trading Signals by MetaQuotes could be an asset.
For everyone else, me included, it’s probably best to stick to buying and selling stocks and options.