Live accounts vs Demo accounts on Zulutrade

#1

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:

  1. 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.

  2. 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.

  3. 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?

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!
Orbital Dynamics

#2

Try offshore brokers that accept USA clients. There are still some.

This is not always true.
And VERY often this is more due to the immaturity, ignorance, and lack of discipline of the investors, who do not practice sound risk management.

**Please also see other brokers that empower copy trading

  • where strategy providers showcase their trading skill with very limited capital – in hopes of managing other people’s money.**
#3

That was nice to read thanks. It would be nice if we could know some statistics from zulu like…

1)Do the majority if investors lose money because they interveve to the provider’s strategy and follow with wrong money managment?

  1. Do they lose money because the provider failed to be diciplined with his own strategy and moved stop losses?
#4

Thanks for the feedback, @FxSailing_Weekly,

I agree that this would be an good statistic to know although they may be hard to implement consistently given that most follow more than one trader. Proper money management is certainly key as margin calls can severely damage or kill accounts. Also, if a follower closes good trades early (because of fear of loss or some other reason) that may also prevent that follower from actually matching the signal providers success.

This is a very interesting idea. The problem is that so many signal providers and followers are only focused on the end result instead of defining and then following the correct trading process. So, when a signal provider goes breaks their rules but then are lucky and still come away with wining trades it sadly seems that the signal provider is applauded. However, if they follow their rules but end up losing that signal provider is downgraded. Going back to my original article, my questions was “does the signal provider keep their word?” So maybe it would be great if the trader who broke their predefined rules had some kind of warning put on their system such as “I don’t follow my own rules”. This would be similar to the very appropriate warning “Risky Activity Detected”.

In the end both of your points could have a similar reason for the loss of money. So if the signal provider doesn’t keep their rules and opens a lot more trades than they said they would that could then cause the follower to get a margin call and thus be forced to close trades early. If multiple signal providers in a followers portfolio ALL break their rules, this loss is amplified!

Thanks again for your thoughts.

#5

Hello @OutsidetheBoxHK,

I appreciate your attempt to help. I already have my money with one of the large Forex brokers from the USA. Of course some consider it a lot harder to trade profitably here given our rules of MAX leverage of 50:1, no hedging and FIFO. Regardless, I have been trading live money from the United States since 2016 and expect to continue to grow my accounts here for many years to come.

The point of my article was that specifically Zulutrade doesn’t allow any live, real money accounts from the USA. This includes putting money into Zulutrade directly or connecting Zulutrade (via EA) to a recognized, live brokerage account. So, should traders from the USA just give up on offering really good signals to followers on Zulutrade just because they are limited to only demo accounts?

#6

Hehe well said! Any new follower would have thought that : the “master” knows what he is doing since the market turned to our favour :sweat_smile:

There are good examples of traders that do it on demo account and still have hundrends of followers.
For me it really doesn’t matter if traders do it on demo or live because if they know what they are doing they will do it good either way. So if a provider is trading well for let’s say 40 weeks on demo and has buid a good history, why would he change his behaviour when real money starts to follow? Real account is a good extra but not determinant, and i guess thats why zulu allows traders with demo, trade real money of followers.

#7
  1. Because of emotion / fear of loss of real money — this is proven over and over again in forex literature and education
  1. zulu no doubt allows demo trading and following by investors so that they can make commissions of the trading – they care not whether the trades end in profit or not – they either B Book Broker or they don’t mind the high turnover rate of investors / traders losing money and blowing up strategies because there is an endless stream of new traders / investors with the “forex dream” of financial freedom and compounded riches.
#8

ZuluTrade is not a broker. Its fintech platform. As we have repeatedly said, there is no interest to have losing Investors.

Your conversation is very interesting. We will give our feedback shortly.

#9

You can provide feedback on much on this platform to explain why it is run the way it is run, without much care about whether traders / investors are making money / sharing in the success of Zulu (commissions) but the facts remain.

Zulu will not change things / how the platform is managed so that the best traders and investors can make money when they work hard.

The over-emphasis on PIPs PIPs PIPs is ruining this social copy trading platform and we all are waiting for the much needed changes to be made – proper ranking algorithm for trading performance, equity as the main factor of displaying performance and offering copying of traders strategies — MUST copy the traders risk management as well as the entries and exits.

Perfect case of all this toxic environment is looking at the “REAL INVESTORS” TAB / “LIVE INVESTORS SUMMARY” on my profile.

  1. How can investors lose so much / when my equity curve is at equity highs?
  2. Look at almost every investor in the Real Investors left margin section, and you will see that they are NOT COPYING my PIPS / EQUITY that I am trading on the master account. It is not even close.

This is due to latency, poor spreads at investors brokerage, and investors copying at their own lot size and closing trades at their own discretion. THIS IS NOT COPY TRADING.

AND BECAUSE OF ALL THIS, I AM NOT GETTING PAID COMMISSIONS.

https://www.zulutrade.com/trader/375788/live-followers

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#10

Hi @ZuluTradersDesk,

Thank you for this very appropriate and timely input. This is indeed an interesting and important conversation which I started in an attempt to clear up some misconceptions and you are stepping in to clear up yet another huge misunderstanding regarding the Zulutrade platform.

As I said in my first post, “thank you for providing this amazing platform!” I look forward to seeing Zulutrade innovate and grow in a sustainable and healthy way!

#11

Hi @OutsidetheBoxHK,

My original topic is an important one and you initially tried to provide some useful input to it. Now, however, you are appearing to hijack this conversation thread with a different conversation direction. I expect that you mean well but let’s keep this conversation focused to the topic(s) at hand. Thanks!

#12

Hi, Orbital Dynamics. It was a very good article. And you know I support your words about opportunities that Zulu gives us here. Good article and deep observation.

#13

Hello to all!

This is an everlasting discussion over the years.

There are pros and cons in any case.
But lets briefly inform you what we are planning to do in the short future…

Introduce the Initial Balance for each Trader
Introduce a new additional version of ROI %
New Ranking factors - Including the Social Responsiveness to Investors
New Restrictions to Demo Traders as we want to push them to become Live Traders
About US Traders, there are not so many copy-trading networks that support them.
Copy-trading networks that have similar structure like us.
At least they have an opportunity to take advantage of our service.
Introducing Stocks.

There are even more projects running however let’s keep something for later.

Regards,

#14

Whether a trader uses live or demo accounts to trade, what really matters is how well you grasp the content. If you are good on demo, there is no reason why you should be bad when it comes to the real thing. You will still get followers, and Zulu needs your followers, which is why they allow you to trade on demo

#15

hello,

I think u can add some restriction on ranking. personally I love your pips based ranking because it gives a restriction to the trader to not open more trade. bcz in any profile if maximum no of trade showing more than 30/40+ its really looks alarming to any investors. but if u apply % based growth then trader will have the luxury to open any lot size in any time. which will make disaster more often. if you check other social platform ull see more signal goes down than Zulu. bcz of % based trading. like a trader open few trade with 0.01 lot and it goes upto 400 pips minus now trader may thinks price will go for his/her favour by 10-15 pips. and to cover that they may open a bigger lot trade and makes the mistake. but here in Zulu though its based on pips trader has to cover those 400 pips and due to large no of trade also gives negative impression trader has to keep the trade no in low and also the lot size. which damages the account lesser than % based growth.

I think Zulu can add 2 section in strategy description section

  1. maximum drawdown in no of pips
  2. maximum no of trade

and these two cant be changed in future. and if trader crosses the limit his/her ranking will be penalized by some % (in example by 20%) so what ever the actual raking position will be 20% less. and also in overview section it will show how many times he breaks his own rules so investor will get the idea of risk with the trader.

I don’t think live acc demo account really dose matter. bcz if a trader provide quality service for few month he will earn 3-10k easily so he can make a 1000 usd and goes crazy.

#16

I personally like pips based system bcz its forces trader to minimize the risk by not allowing take bigger lot. I,e- if a trader have some drawdown about 400 pips with normal open trade 1-5. now mkt in a such situation trader may strongly believes that now price will go certain way for 10-20 pips so that he can close his/her trade in BE. at this point with % model a trader can easily open a bigger size trade to cover the losses. but in pips mode trader will not do this bcz he knows at the end his outcome will be negative in ranking. here may arises several question:

  1. trader may open same lot trade with big numbers.
    ans: yes , but problem is maximum no of trade makes impact on the investors and gives negative impression.

  2. trading is not for ranking but for profit.
    ans: agree but higher lot trade cat guarantee of loss minimization in such situation. most of the time it causes margin calls. bcz those social platform uses % based system ull find signal providers get margin call more often than Zulu.

one of the rule of trading is cover the losses with the same lot size(if u don’t re charge your account) then it will causes less harm to u.

in many way Zulu is best platform for investors. bcz Zulu dosent count past trade history like others. here performance started since a account synced with the platform.

cost of following is less than others.

few adjustment can be added in Zulu to make this platform more reliable:

  1. add 2 section in description area which will be filled during acc created time and cant be changed later, maximum no of drawdown and maximum no of trade. so if a trader breaks its setting will be pinalized ranking by some %. and also in overview section it will show how many times he breaks his own settings so investor will get idea about his control.

  2. demo accounts will get some demerit points so that demo accounts ranking will be lesser by some % than live accounts.

#17

I find this a very good idea also. I would add that these settings could be changeable as long as the trader keeps the account pivate and tunes his strategy. But when it goes public, these settings should be locked.

#18

yes agree, after goes public it cant be editable. and also Zulu can disclose the penalty system as well so trader no what will be the cost. like: for 1st time he breaks the rules ranking will be down by 5/10% ( or what ever number is ideal) and always his ranking will be down by this % from his actual ranking. then if he breaks again additional 1-2% will be added to his demerit point. so it will force a trader to follow his rules whatever acc he use demo or live. bcz I don’t think there are much difference in live or demo in terms of traders risk taking.

#19

Nice article. Thank you very much.

#20

I think the demo account make Zulutrade unique (for both investors and traders)

  • At least you can get some time to trial before putting real funds in invested for the investor.
  • As for the trader…besides the variable “slippage” there is no difference…pips and all other stats are the same. Would you choose a live trader over demo trader if they had similar results?