Apples and Oranges Performance Accounting
Is Your FOREX Signal Provider Being Honest About Performance?
I know you’ve seen some ridiculous claims from signal providers. Some claim thousands of pips per month in winning trades. I’ve sampled some of my competition’s FOREX trade signals to see how well they match their claims. To make a long story short, THEY DON’T! In fact, most report using what I call, “Apples and Oranges Reporting.” Apples and Oranges Reporting is when a FOREX Signal Provider reports his losses in single lots, but sums his wins, claiming all of the pips for two or three take profit points. I found a great example at a well known signal provider who’s charging $299.00 per month for his signals.
FOREX Signal Provider X reports having placed the following FOREX trade signal:
Sell EUR/USD@1.3367 SL:1.3405 TP1:1.3337 TP2:1.3307 TP3:1.3257
The risk is 38 pips
The profit at TP1 = 30 pips
The profit at TP2 = 60 pips
The profit at TP3 = 110 pips
This trade was picked up and reached TP1 and TP2. Price then turned around and the rest of the position was quickly stopped out.
The reported profit for this trade is +90 pips! FOREX Signal Provider X claims the first 2 take profits as full positions—when they are really two thirds of one position—yet ignores the 38 pip loss for the last “lot”. There are a few things wrong with this scenario. Remember, this is an actual FOREX Signal from one of those other guys. Pay attention because this is a very popular way for FOREX Signal Providers to exaggerate their wins. First, the reported profit is absolutely FALSE! There was not a 90 pip profit. Price did not even move 90 pips during the trade, unless you count the reversal. The real profit was 17.16 pips. How do I calculate that? I simply use a weighted earnings formula. Since the trade is broken up into thirds, I use a 0.33 multiplier for each of the wins and losses. Then I add the wins and subtract the loss.
(30 x 0.33) + (60 x 0.33) – (38 x 0.33) = 17.16 pips
The second problem is that the reward-to-risk ratio on this trade is horrible!
Using the same weighting formula as before, we find a maximum 66 pip gain [(30 x .33) + (60 x .33) + (110 x .33)] vs. a potential 38 pip loss. Why? Because our profits reduce as the trade progresses, but the loss is total. I could get into more depth on this, but simply put, the best case scenario makes this a low value trade. Market Mover Edge FOREX Signals are only considered with a reward-to-risk ratio of 2:1 or more. I seek out—and often find—those “treasure trades” with a 4:1, 5:1 or even 6:1 reward to risk ratio.
Finally, I have to mention that this FOREX Trade Signal had almost no possibility of making it to the third take profit target. This was a counter-trend trade that was projected to hit an important Fibonacci level near TP2. Counter-trend trades are risky when they are good setups. They’re suicide when the analysis is flawed.
Market Mover Edge FOREX Signal reporting is two-fold. First, I report all wins and losses. Some of my trades have what I call the Risk-Free Trading Zone. These are trades where I call a ½ take profit to preserve your capital in case of a jittery market. Again, a few trades I recommend taking a ½ position. This is all recorded and visible to all on the performance page. No games, no tricks, no polishing—just honest reporting. I have losses! I’m proud to report those losses. It’s how I handle losses that makes me successful. My intra-day results from 1 May 2009 to 22 May 2009 were:
USDCHF/Short – 4 May 2009 +106 pips
EURUSD/Long – 5 May 2009 +128 pips
EURUSD/Long – 6 May 2009 -25 pips
GBPUSD/Long – 7 May 2009 -59 pips
GBPUSD/Long – 8 May 2009 +100 pips
USDCAD/Short – 13 May 2009 -28 pips
GBPUSD/Long – 15 May 2009 + 200 pips
GBPJPY/Long – 17 May 2009 +27 pips (gap)
USDJPY/Long – 17 May 2009 +20 pips (gap)
EURJPY/Long – 17 May 2009 Flat (gap)
GBPUSD/Short – 18 May 2009 -30 pips
USDCAD/Long – 18 May 2009 -5 pips
EURUSD/Short – 18 May 2009 -26
USDCHF/Short 20 May 2009 – +61 pips
USDCHF/Short – 21 May 2009 – +109 pips
Total: +578 pips Please see our performance page for more in-depth details.
Market Mover Edge Weekly Extreme trades for May SO FAR are over 1100 pips! My earnings are actually 1119 pips, but others entered later or earlier and got a few more or a few less.
Now that you know how to debunk the typical FOREX Signal Provider’s accounting practice, it’s time to demand the very best. Honesty, accuracy AND performance can and does come in one service—Market Mover Edge. See you in our private trading room after you’ve joined our team! Welcome home, fellow trader. Let’s go rip some pips!