There is an idea that live or “real money” accounts on Zulutrade are categorically superior to demo accounts on Zulutrade. Now, in the “real world” I agree that it is an important criteria of a worthy signal provider is that they actually do trade live funds in a forex account. There are indeed many things about competent trading and long term success that can only be learned through actual, live experience but that is not the purpose of this post. Rather I am specifically referring to the Zulutrade platform in this post. Here are some things to consider:
Indeed Zulutrade has a long history of many demo traders growing a good investment following, perhaps even through a long history of decent trading, and then eventually crash out those accounts when the market turns against them. I have been watching Zulutrade for years and seen this over and over again and I can see how this outcome would make followers jaded and upset.
Unfortunately, bad trading behavior isn’t exclusive to demo accounts and, even recently, some of the most disastrous results have happened on “live accounts”. This includes moving stops, opening more and more positions, martingaling, trading without stops, etc. In this regard then, the demo vs live distinction seems to give a false sense of security to well meaning followers and a uncalled for sense of pride to the “live account” signal providers.
Unlike other platforms, Zulutrade doesn’t give us a window into what account balances the “live” trader actually has but, from what I can tell with my research, the majority of any “live” accounts on Zulutrade are between USD $1,250 to $10,000 (at the most). I am not suggesting that Zulutrade must reveal these stats and I found current account balances because quite a few of the live traders also have their accounts on other platforms. So, assuming the signal provider says they are a “professional trader”, a $1,500 account or even a $6,500 live account is essentially the same as a “demo” account. Further it seems though that some of these “live” account traders with small accounts somehow feel superior to the “demo” accounts!?!
Zulutrade does not accept live or “real money” accounts from the USA. Look through all Zulutrade live signal provider accounts from the USA. Not one of them that has a live account also has a verified address or they would get rejected. Some time ago Zulutrade made the choice to no longer accept live accounts from the USA due to regulations. I know because I asked (multiple times). I don’t feel that Zulutrade needs to change this rule for US traders (the current US regulations are complex and expensive for brokers) but it is important to point it out.
- Thus the only current legitimate option for USA traders with Zulutrade then is a “demo” account and some of these same demo traders though may have successful real, “live” trading accounts, just not with Zulutrade. As long as these same traders use the same trading discipline and techniques as they do in their live accounts why shouldn’t they make their trading systems available to the Zulutrade community?!?
The fact is that, across all platforms and brokers around the world, most retail traders (live or demo) lose money and most Zulutrade signal providers will lose their followers some or all of their money. Obviously money can be made, too, otherwise no sane person would ever put their money into forex.
Similarly, there are some good traders, some average traders and many poor traders on the Zulutrade platform. Some have live accounts and some can only have demo accounts. Zultrade was one of the pioneeres of the social trading idea and has always been able to give signal providers the option to “level the playing field” between traders. So the trader who has a good method but doesn’t yet have $50,000 to invest in a live account can compete with the one doesn’t really know who to trade but has a rich family and can afford to blow that account. As an investor I want to follow the trader who actually knows how to trade. I hope that Zulutrade continues to give traders and followers such opportunities for many years to come!
So if the “live” vs “demo” account distinction on Zulutrade is not the best way to tell if a signal is worth following, what is? I don’t at all have the only answers to this but here are just some of my thoughts:
Does their profile give investors a good idea of what actual risks vs rewards are a part of their system?
- Just saying “average profits of 10% per month” isn’t good enough. How much risk is the signal provider willing to take on to get those profits? 10% or 30% or more?!? Does the signal provider even know how much risk they are exposing their account to? If they trade without stops the answer is that they have no true idea what kind of risk they have. Of course the “market needs room to move” but be bold enough to actually put a realistic stop on all of your trades, especially ones held overnight.
- Maybe it’s even best to not even say how much profit will be made each month/year and rather let the trade history speak for the system. We all know that Forex trading can be immensely profitable but are we really aware of the risks?!?
- Further, this idea of higher win rates being superior to lower win rates misses such a key part of the story. What is the signal provider risking to get their reward? It should be obvious that winning an average of 6 pips per trade while losing an average of 250 pips per trade is a disaster waiting to happen.
- There are numerous well known signal providers on Zulutrade (even with “live accounts”) who have high winning percentages and yet eventually lose their followers a lot of money. This is especially true when the same trader opens multiple positions in the same currency. Risk is amplified.
Does the trader have a clearly identified set of trading rules and do they follow those rules without exception? Do they keep their word?
- If the signal provider profiles reads “max stop is 150 pips” then it should always be 150 pips even if the market is going against you.
- If the signal provider says “max positions is 10” then don’t make it 11 or 25 without alerting current investors and without also changing their profile.
- If the signal provider says “only major and minor currencies will be traded” are they now suddenly trading exotic currencies to give them more pips? Again, are they keeping their word?
- Just saying “trust me” or “I’ve got a live account so I feel your pain” isn’t good enough. At. All.
- If the signal provider broke their word once, it is likely that they will again. Signal providers who have made mistakes should be able to provide a good reason for why they did so.
Does the trader have a good track record and for a long enough period of time to know that they’ve been tested through adverse market conditions? It might take weeks or many months or even longer but, at some point, market conditions will be difficult for every system.
- How does the trader react when the market is not going their way?
- Do they panic? Move stops? Open more and more positions? Change lot sizes? Trade unexpected currencies? Ignore their followers?
- In one sense, it seems better to follow a signal provider who has already gone through some tough times but recovered in a healthy way while following their rules rather than a signal provider who has never really been tested. Again, how does a trader react to drawdowns?
- How does the trader react when the market is not going their way?
There are many more things I could write about such as what statistics are actually useful in knowing which signal providers are more likely to succeed and other such topics but my focus here centers on this: investors need to be able to depend on the word of their signal provider–every single time for the life of their signal. And if these same signal providers are also actually good at trading then they are worthy of a significant following on Zulutrade – regardless of whether they can have a live or a demo account.
- To my fellow signal providers: make money for your investors by trading consistently and trading well. Be patient and appropriately communicative with your followers and be humble.
- To our investors: you have a right to expect your signal provider to do what they say they will do. Ask them good questions and be willing to learn + grow on this amazing journey! Don’t get too greedy (over-leverage, open too many trades, etc.) or your account will likely have a short life.
- @ZuluTradersDesk thank you for providing this amazing platform. We look forward to watching you continue to develop and innovate in this arena. Feel free to let us know how we can help keep you moving forward.
All the best!