Signal Trader: Our review

Signal Trader is a mirror trading platform that allows investors to visualise and automatically copy the trades of expert forex traders.

As Signal Trader is not a broker, you need to register with one of the 11 partner brokers to copy trades with a real account. The minimum amount you need to start using it is $5,000 (or equivalent). However, you can get started by opening a free Signal Trader demo account that is valid for 1 month.

The trade copying systems

The success of a mirror trading platform lies primarily in the quality of the forex traders that you can follow and copy. Signal Trader refers to them as "trading systems". There are currently 12 systems, and all of them use their own (real) trading accounts to send signals (the traders that you can copy risk their own money). The minimum balance they need is $8,000, but some make transfers with accounts that have over $100,000 (unlike other platforms, you can see their current account balance and their trading history).

Traders must undergo an evaluation process before being accepted by Signal Trader. They must have a positive yield of at least 3% and demonstrate prudent risk management (maximum drawdown of 15%) over the lifetime of their account. These traders are paid $0.50 per mini-lot traded in the accounts of copiers, and only if the trades are profitable. Traders' commissions therefore depend of their success.

Most trading systems use experts advisors (trading robots), but the descriptions also mention that professional traders are continuously monitoring the systems and trades in order to intervene if necessary.

It is interesting to note that most of the systems have trades that have been underway for several days. This suggests that they are clearly not day traders, but medium and long-term traders. The systems that have many open trades over a long period of time seem to cover most of their positions, which means that the overall risk is managed. There is only one kind of martingale strategy (avoid it), but the strategy is clearly explained in the description. Overall, the trading systems seem to be well managed, but they are not all profitable.

Selecting the trading systems to copy on Signal Trader

The number of trading systems you can copy is very limited (only 12), the filter options are therefore uneccessary, as you can easily read the summary of each system.

Each system has a page that displays a table summarising the system's trading history. You can see the account balance, its net profit, the floating P/L, the available margin available, etc.

You also get this information:

• a detailed description of the strategy
• all open and closed trades in real time
• performance indicators such as RAR, maximum drawdown, average profit per trade, the average duration of a trade, etc.
• charts that display overall profit, balance, monthly P/L, traded symbols and P/L per symbol

The information provided by Signal Trader is completely transparent and displayed in real time. The charts and indicators are sufficient, but it is not possible to download a trading history in Excel in order to conduct an offline analysis.

It is important to note that the maximum drawdown displayed is calculated in relation to closed trades, it does not take into account currently open positions. Also, Signal Trader provides users with a table listing the minimum capital requirements recommended for each trading system. This table is calculated using the past drawdown and the trading system's margin requirements (it seems that this information will soon be available online).

Risk and money management

After you've selected a trading system that you want to copy into your forex account, you must define your desired automatic trading parameters. This means defining the "mirror ratio" you want to use when copying trades. The x1 setting means that the size of each trade initiated in your account will be the same as in the system you are copying. You can increase or decrease this ratio in relation to the size of the account of the trading system. For example: x2 will double your lot sizes, while x0.25 will reduce them.

In terms of risk management, Signal Trader does not offer any protective tools. For example, you cannot automatically stop a trading system if it is losing a certain amount. Risk management is therefore entirely in the hands of the forex trader you are copying. These traders are risking their own money, so it is in their interest to manage risk like trading professionals. Nevertheless, some kind of protection against any careless risks taken by a trader would have been useful.

Signal Trader's interface accurately displays the transactions in your trading account, you can monitor all open and closed trades, real-time performance and the individual contribution of each forex trading system you are copying. However, if you want to close trades manually, you must use your forex broker's interface.

Signal Trader's commissions

You can open a real Signal Trader account for free, and you won't have to pay any management or performance fees either. The only requirement is that you open a trading account with one of their partner forex brokers through the Signal Trader website and fund your account with at least $5,000 or equivalent in your currency.

Signal Trader makes money and pays its traders using the brokers' IB (Introducing Broker) commissions. The only real cost to you will be the broker's spreads, which are slightly increased by about 0.5 pips.

Slippage is an important aspect of mirror trading. It represents the difference between the price you're able to get in your account and what the trader gets in his own account. Slippage that is against you means that your performance won't be as good as that of the trader you are copying. There are several factors that influence slippage in an independent mirror trading platform such as Signal Trader. For example, the slippage may be greater if the trader that you're copying doesn't use the same broker as you, as spreads and execution speed will be different. But apparently, according to user reviews there is no slippage on Signal Trader, which is very impressive and unusual in mirror trading platforms.

Overall, the cost of using Signal Trader is rather low.

Social interaction

Signal Trader doesn't offer social interaction (comments, ratings or a forum). Most investors who join Signal Trader do so in order to automatically copy the trades of professional forex traders. However, you can also choose to follow a trader and receive instant email notifications when he or she opens or closes trades. You can then use this information to make your own trading decisions.

Pros:

• All traders send out signals from a live account
• All of the trading systems go through Signal Trader's evaluation process
• Historical data is completely transparent
• Demo accounts are available
• Low cost (the spread is slightly increased)
• Some of the systems are quite good
• Accounts can be opened in multiple currencies (pound, euro, yen, dollar...)

Cons:

• No tools to protect traders against risks
• You cannot download trading histories to perform offline analyses
• The minimum investment is $5,000
• No interaction with the other traders