The following 10 rules are very important for perfect automated trading designs or to chose your Signal Provider:
- SL/stop used?. A trade has to be stopped if it’s drifting to far away… (or absolute stop should be used)
- Max number of positions? (no huge DD’s by false trade’ssssss’ open when the price is moving against you)
- A system thats able to trade a sideways/trending/choppy market. (else the risk of the strategy isn’t spreaded with your own attention of checking the trading system over time, because the systems makes ‘jumps’ throughout the month. Good oppertunity’s are missed by the system in ‘grey’ zone. And: No periods of bad performance in history.)
- The yearly max DD of the system has to be smaller than the 3-monthly return.
- Less than 10% Max Drawdown!? And Max 90% positive trades ratio. (otherwise unnecessary risk of DD’s)
- Does the system trades over weekend? (Try to think about this. Some traders close false trades before weekend. Sometimes it’s risky to trade over weekend by gap of more than 100 pips)
- Responsible lots-ratio. Some SP’s mention CRAZY lots-ratio advises. Is the SP concerned by his own commisions (and high lots-ratio) or does he feels any responsability towards followers’ accounts? (risk)
- No changes in trading rules/codes? Same EA / strategy used over time? Your SP decision is based on history. Correct history? (try to read the graph).
- History > 3 months (3 months is standard period at zulutrade to calculate the SP performance) Than still a lot of strategies go down after this ’3-months-trial-period’ at zulu. DD is not managed at a standardised way, but based on luck. Sometimes you are very lucky! Sometimes you are not. ‘One-year-surviving-strategies’ are preferred.
- Overall feelings of SP, trading strategy and performance vs risk.
(strategy vs own-forex-beliefs, quality info, correct use of language etc.)