For the marketing of a trading strategy as an Expert Advisor, different types of signal services can be used as an alternative solution. Since the trading strategy will never leave the provider's influence domain, and only the result -namely the signal - will be communicated, it is protected from illegal copies which is the key advantage of this option. Setting up a signal service does not necessarily demand programming skills; this implies that manual strategies can be conveniently accessed by a rather large customer base.
A signal service comes with pros and cons. The client will benefit from a free broker choice as well as from the option to intervene manually into the trading strategy, in particular as managed account are clearly separated. However, an inadequate level of automation and possible time lags when executing the provided signals may have an adverse effect.
Looking at the pricing, the costs for a signal service range between the purchase of an Expert Advisor and a managed account. In contrast to EAs, signal services are usually not offered as a fixed purchase fee, but rather as a monthly fee similar to a subscription. It is not unlikely that already after one year the total costs will exceed the costs for the purchase of an EA significantly.
Signal services do not ask for a success commission or any other hidden broker fees, as it is the case with managed accounts. Usually, the monthly fees amount to approximately USD 100 (possibly with a discount for quarterly or yearly payments), which implies that signal services usually require a much higher investment capital. Therefore, the planned monthly profits before costs should reach at least twice the monthly fee. A signal service targeting at a yield of 5% with a monthly fee of USD 100 would need an initial capital of a minimum USD 4,000. Naturally, testing involves a lower investment capital, though the testing phase will not really cover the expenses.
Signal provider can be followed in various manners which mainly differ in the level of automation as well as in the filtering and controlling capabilities available to the client.
In its most basic form, the signal provider delivers manual trading signals to the client, e.g. within the customer area of a website, a newsletter, emails or text messaging services. These signals can be executed in form of a verbal pending order with some lead time required or possibly also in near real time. It remains at the client's discretion when and how signals are implemented. Since an uninterrupted supervision of the signals will hardly be available, the client may run the risk to miss some signals or to implement signals only at a time when they are no longer valid.
The trade copier is another popular type of signal service which acts as an expert advisor copying the trading signals used for the trades on the provider's master account to the client's account. Some providers even develop their own specific EAs for this purpose; however, standard products are available in the market which can be licensed easily, such as SignalCopy.
Nevertheless, particularly in the case of short-term strategies, the detour via a trade copier may turn out to be unfavourable. As an initial step, the trade must be executed on the master account of the signal provider before it can be transferred to the trade copier. Only then, the information is forwarded to the client's trade copier where the order execution has to be repeated once more. Depending on the market environment, the time delay can result in a mismatch of several pips when opening and closing a position which by default will render a scalping strategy unprofitable.<7p>
Usually, several options for pre-setting the risk, lot size, currency pairs traded, number of positions and other parameters are offered to the client according to the type of the trade copier used. Good EAs come along with an additional trade management feature which caters for the validity setting of the signals and for a maximum slippage definition between orders on the master account and the respective position to be opened on the client account.
Signal platforms offer a further alternative for the use of a signal service. These are mainly web portals which take care of the technical and administrative execution including service agreements with the signals providers. These portals often provide a wide range of signals, and they conveniently allow for an execution within a single architecture, eliminating the need of separate EAs for each signal.
Frequently, trade copiers which have been specifically developed for this purpose are being deployed; the execution method will be as described above. Alternatively, the service provider may copy the trades directly onto the client account. In this case, the client has to share the registration details with the service provider which by nature involves a certain risk, although the service provider of a reputable broker will not be permitted to access funds on a client account.
In addition, this fully automated approach also implies that the client is rather moving towards managed accounts, as ultimately the service provider will control the trading activities on the account, and the client may be severely restricted in any possibilities to intervene.
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