The truth is that the world of short-term trading is a vein to create weapons of mass destruction packaged in the most pompous ads of the most sophisticated trading.
I recently opened a demo account at a copy trading provider, just out of curiosity, to see what was there, knowing right away that it was not going to be “good”.
Well, depending on the point of view, of course.
From the point of view of street traders, obviously not good.
Good for the provider.
This copy trading service differs a bit from the rest of brokers in the sector, such as eToro, Darwinex or Ayondo, in the sense that there is only a very small selection of suppliers with which to copy the operations.
This they do to give it an air of superiority, of sophistication when it comes to choosing its expert traders, in such a way that the deluded think that by having a “portfolio of 10 supertraders”, they are facing a real gold mine.
According to the website, these traders have to pass quite demanding trading criteria, among them the typical minimum drawdown, so much profit per month, number of trades, and so on.
However, if we start thinking in a more serious way we could see that the fact that said copy trading service puts us a table with its 10 expert traders and what they earn per month, does not prove that those traders are real.
Who tells you that these traders are not a pure artificial invention of the same company?
That is, you have no way to prove that those traders with such striking names are real traders.
The issue of names is something that is worthy of study, in this world of expert traders and copy trading we are not unaware of the fact that the more the name of the movie, the more attractive it sounds, using both old and “urban” mythology themes or online “, with names like” Neo “, as a typical case.
The only thing you have is a very well done website with a supposed revolutionary trading service that promises you that you will earn a lot of money following their strategies.
Of course, in the same website they talk about the alliances they have with many brokers, including some of the best known in the world of Forex, with which they gain much confidence among potential customers.
The operation of promises in social trading
The theme works in a simple way and a priori sounds quite good and even promising.
A company is created with a web that is dedicated to collect data from some of the best online traders in the world, which must have accounts in Metatrader 4 with a proven record (as if these records could not be manipulated in many ways) .
This company would offer those traders the possibility of joining their copy trading program, in such a way that they could offer their signals in exchange for taking a percentage of the commissions that they and their copiers generate.
So far so good.
Once that company has captured a wide selection of traders, then you will have the product ready.
What you have to achieve is customers who want to join to copy the strategies of the company’s expert traders.
In theory, everyone wins: the copy trading company, the expert trader and the copy trader.
The copy trading company would earn a commission on the operations that the expert traders do and the volume they receive from the copiers.
Expert traders would earn a part of the commission for the winning trades.
Copier traders would gain by capital increase due to the use of “proven efficiency” strategies.
Everything sounds great, right?
Another holy trinity of trading put in the hands of retail traders so that they can join the live club of the account, live in a kind of heat school.
All very nice, if it was not for such a scheme is illusory.
Illusory because part of the fact that in the first place there are those skilled traders capable of earning 200% per year and that they want to offer their signals in a service like this.
If those traders existed, believe me, they would not be thinking of offering their systems in a service like this.
In addition, there is always the irrefutable fact that if a system is able to return 300% a year, for example, that should be able to confirm it with a record of several years, with which we would have that the accounts of said “expert traders” should have multiplied by 50, 100 or 200 in a matter of 4 or 5 years.
If the system cannot show that it has earned that percentage in those years, then that system cannot be as good as it promises, in the long term, of course.
That is to say, that a system gains 200% in 8 months does not make it an infallible system, far from it.
Another pretty ridiculous thing is the fact that if a company is able to find such good traders capable of earning, say, 100% a year, why would they be interested in offering such traders to the public?
Why does not that company do the same thing it says to its customers that it’s so good?
This company, with the money it has invested in the service, could simply invest it in these strategies and earn a fortune, without the need to find inexperienced traders so that they become “rich”.
For example, if the systems are so good, the company could ask for a loan of 2 million dollars at 8% per year and with an average annual profit of 108%, it would be doubling its account each year, generating the first year 2 million dollars and the next 4 million in benefits (I’m not counting the taxes for benefits but the example serves to get us an idea).
Do not you see the fallacious character of the matter?
Why bother to give a service in such a way when you can be from your home without hiring staff or sending emails to anyone, and earning a fortune?
No, obviously not.
Email marketing campaigns in copy trading
After having registered and without actually using the demo service, this company started sending emails with a lot of recurrence, in what is a typical online sales campaign, not very different from what any guru in any sector can do.
These emails did not stop emphasizing the possibility that joining this service is the best in the world, and they did not stop offering all kinds of advantages.
One of the favourites is to do a study of how much you would have earned in the last year, with a profit calculator that would calculate the profits resulting from having followed the systems you would have chosen.
All this in a pretty cool web application, something that people love, that by browsing in a perfectly automated and efficient online system they believe that they are facing true “professionals of trading“.
In fact, I have to admit that it is quite well mounted.
They give you the possibility to choose between an portfolio formed by traders, in such a way that you can place the percentage of funds that you choose in each one.
Once this assignment is made, the system launches the simulation and teaches you the trading behaviour in almost “real” time with an interactive graph of the last year.
In this case I recognize that they have done a good job, because they have put some profits more in line with the reality of trading.
So, if I had invested in such traders, I would have earned 60% (rounding) in the last year, which is not bad, especially when I compare it with the different investment alternatives.
If we add to these numbers a strong advertising campaign and a good promotion system by email, it will not be so difficult to find enough investors willing to invest their money in this type of scheme.
Copy trading and automation: the perfect combination.
One of the keys to success in the “sale” of this type of service is to associate it with automation and the supposed improvement that this concept brings to the world of trading.
Just to mention the term automate and we already have that air of sophistication that makes many believe that the fact that trading becomes a little more “technological”, this has to be more advanced, when in reality, what happens is almost the opposite, that is, that this issue of automatic trading is more aimed at automating your losses.
Greetings and good trading
Original article: ¿Servicios de trading sofisticados?