Kama-spot Review ZuluTrade Trader May 2013
While Kama-spot managed to get to the number 1 position in both the ZuluTrade ranking and in terms of popularity within its first 4 months, we held off on writing a full review because we clearly felt not enough data was available yet. They now have a history of 32 weeks, and while this is still fairly short, their recent trading history has provided some additional insight to make a full review worthwhile. At the time of this review (May 21st 2013) Kama-spot was still 7th in terms of money following them (over $4,400,000) though only 2019th in the ZuluRaking. Based on Kama-spot’s ZuluTrade history to date, here’s our review:
- overall profitable
- reasonable communicator
- strategy not clearly explained (i.e. stop levels incorrect in description)
- stop levels set at arbitrarily levels (i.e. not based on the market conditions)
- increased maximum number of open trades over time (adding to losing positions)
- used end-of-month adjustments (to safeguard commissions for next month)
- relative high historical drawdown and with additional open orders potential for higher drawdown
- performance and strategy significantly impacted after first losing streak (disregarding original principles)
- do not trade with their own money
Kama-sport describe their strategy as technical analysis, using an automated advisor to tell them the direction of the trade, entry points and duration. But they mention they personally adjust the system and trades based on fundamentals and market conditions . While they mention in their strategy description that they use a 35-55 stop level, it’s been clear from their further updates and trading history that the actual stop levels are set at 250 pips (though some trades are closed before those levels). While use stop levels is key to a long term successful strategy we often argue that professional traders normally put their stop levels dependent on the market conditions (e.g. above or below resistance levels) and don’t use some arbitrarily number.
For the first five months Kama-spot’s results were pretty exceptional though (see graph below), with returns of almost 1000 pips per month for relative low drawdown. Within 3 months they were among the most followed ZuluTrade signal providers and in 4 months Kama-spot managed to get to the top of the ZuluRanking as well.
Their strategy of trading the major EURUSD and GBPUSD pairs with a maximum of 5 open positions and targeting on most occasions between 10 -25 pips per trade (though sometimes > 50 pips per position) proved very effective. Hardly any trades until then were closed in a loss and the stop loss level of 250 was never hit.
As we keep mentioning though, no system or trading strategy is successful all the time (just not possible) and any system will at some stage incur some losses. It’s whenever this happens that you can learn a lot about a trader in the sense of how they recover from the poor trading run. In the case of Kama-spot the poor run started in the beginning of April when SELL positions were taken on the GBPUSD and EURUSD pairs, though the pairs moved in the opposite position. At that time, with 250 stop levels and 5 open trades, the maximum losses you would normally expect from this ‘trade cycle’ would be 1250 pips, which is slightly higher than the average monthly returns up to then, so overall still not that bad (i.e. if you’d followed Kama-spot for 2 months you’d still be in profit).
However looking at the actual ZuluTrade trade history for Kama-spot, you see that once some of these trades were closed at 250 stop level, Kama-spot almost immediately opened a new trade in the same position. It’s very questionable whether it was their ‘system advisor’ telling them to open these positions or whether at that stage the trader took over and thought that since already so much was lost, the market would turn so they tried to make the losses back as quickly as possible, ignoring their usual strategy. Clearly this approach proved to be wrong since all of these additional trades resulted in further losses (some hitting the 250 stop level again).
Another example of where Kama-spot clearly stop following their approach is at the end of April. Having already incurred significant losses for the month, they decided to close all their open losing positions on the last day of the month. We assume the reasoning behind this was that because they were not getting their commissions anyway for that month, by closing those positions they could at least start the next month with a clean slate (we already mentioned in our ZuluTrade signal provider selection tips for over a year to be wary of this kind of trading behaviour).
Even further proof that Kama-spot seems to be disregarding their original strategy and principles is occurring in May, where they’ve increased their maximum number of open positions to 11. Because these extra positions are added to already losing positions (in the hope the market turns) this obviously means almost doubling the potential drawdown and losses.
As we keep on mentioning in these reviews, successful traders are not only identified by how they perform when the market goes well for them, but even more so when they have a bad run and they need to recover from that. The strategy/system Kama-spot was using was obviously performing very well for them for 5 months and hence they didn’t need to react and it was easy to keep to their principles. The key test came the first time some trades hit their 250 stop level and Kama-spot started to disregard their original approach. We’re not saying they did this on purpose as it’s often a natural human reaction to try and recover as quickly as possible from some losses, normally by keeping on adding more and more to the losing positions in the vein hope the market will turn quickly. Obviously the fact that Kama-spot had a massive ZuluTrade community commenting on every trade (even if some losses were to be expected) surely didn’t make this easier.
However this is where professional traders distinguish themselves from amateur traders. We also wonder if the same approach would have been used if they had been trading with their own money as well.
Having said all of this, there’re still many followers out there who made good money from Kama-spot (as displayed on their profile). Most got out as well without taking the recent losses and anyone who had been following Kama-spot for a few months before they started disregarding their principles would still have gotten out with a profit. As we mentioned before, with any new traders on ZuluTrade it’s important to monitor their trading behaviour closely. So, when would have been the best time to get out? In our opinion this would have been once the first trade hit the 250 stop level and another one was opened directly afterwards in the same direction. Reason for this is that at that stage they clearly broke their principles (a stop isn’t a stop if another trade is opened when the stop level is hot).
So in summary, while Kama-spot clearly had a system and strategy which worked well for 5-6 months, they’ve shown some poor trading behaviour after they had their first losses (by disregarding their principles, opening more trades, adding to losing positions and making end-of-month adjustments). Overall though Kama-spot is still profitable and there’s nothing to say that they cannot learn from their mistakes and get back to winning ways. However so far there’re no signs of this happening, so we like to see another 12 months of trading history before making a judgement on that.
Please note that this ZuluTrade signal provider review is included here for educational purposes only. Our trader reviews do not constitute advice and inclusion of a trader isn’t to be considered as an endorsement of that trader. Trading on social trading networks and Forex instruments is high risk. Always consult an independent financial advisor if you’re not sure whether this type of investing is right for you.