Choosing A Forex Signal Provider
The popularity and easy accessibility of the ForEx, or foreign exchange market, makes many people choose it as their financial stepping stone. Together with its indisputable popularity come some extras. The extras include computer programs, trading systems, videos, books and most of all, third party signal providers. Now, I will discuss some points when searching for a good third party signal provider.
Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. You can have several signal providers trading your forex account or just one.
The US Constitution states that all men are created equal. Unfortunately this is not the case with traders or signal providers. Some traders look like a million bucks at first glance but turn out to be bad news upon further inspection. To keep away from these types of traders we have to set some guideline to follow when choosing a third party signal provider.
1. First, I make sure that the trader is a winner. This is a little bit obvious already but I could always see losers with 50 to 100 people trading their signals.
2. The next thing I look at is how long they have been a winner. If a trader has been winning for a week, this means nothing to me. I recommend that you don't trade any signal provider with less than a few months of results to show you. Any one can place a few good trades one week and get lucky. If you are going to be trading this trader's signals they need to be established.
3. An important factor is the maximum drawdown that a trader has caused to their account to date. Big draw downs mean a greater chance of a margin call and a much bigger chance that you will never recoup all of the losses that take place in a massive draw down.
4. The first few are fairly easy to keep an eye out for. They should all be displayed on the main screen and you may even be able to sort by each of them. Once you find several signal providers that you are considering, you should think about looking a little closer.
a. Look at their actual trades. Do they have a good win rate because they have opened a ton of trades all at the same time on the same currency pair? They may have 20 winners in a row. This looks great, but if you look a bit deeper you will see that its really only 1 winning trade places 20 times. Not as impressive is it?
b. Have a look at how far they let their trades get away from them. Is your signal provider letting trades get 300 pips or more against them at times? Do they close trades the minute they turn into profit? If so this is a trader who does not understand risk and reward and should not be considered to trade real money.
c. Does your trader add to losing positions? Generally someone who is doing this is trying to average down their entry point and is setting themselves up for failure. Make sure when they do fail that your money is not on the line.
5. Choose a signal provider that suits you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. This might be OK with you. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader.
This is only a simple guide for you to consider when looking for good third party signal provider. Remember to always trade a demo before a live account and that ultimately the money is yours and no matter what happens to it, you are the one who's responsible for it. - 23212
Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. You can have several signal providers trading your forex account or just one.
The US Constitution states that all men are created equal. Unfortunately this is not the case with traders or signal providers. Some traders look like a million bucks at first glance but turn out to be bad news upon further inspection. To keep away from these types of traders we have to set some guideline to follow when choosing a third party signal provider.
1. First, I make sure that the trader is a winner. This is a little bit obvious already but I could always see losers with 50 to 100 people trading their signals.
2. The next thing I look at is how long they have been a winner. If a trader has been winning for a week, this means nothing to me. I recommend that you don't trade any signal provider with less than a few months of results to show you. Any one can place a few good trades one week and get lucky. If you are going to be trading this trader's signals they need to be established.
3. An important factor is the maximum drawdown that a trader has caused to their account to date. Big draw downs mean a greater chance of a margin call and a much bigger chance that you will never recoup all of the losses that take place in a massive draw down.
4. The first few are fairly easy to keep an eye out for. They should all be displayed on the main screen and you may even be able to sort by each of them. Once you find several signal providers that you are considering, you should think about looking a little closer.
a. Look at their actual trades. Do they have a good win rate because they have opened a ton of trades all at the same time on the same currency pair? They may have 20 winners in a row. This looks great, but if you look a bit deeper you will see that its really only 1 winning trade places 20 times. Not as impressive is it?
b. Have a look at how far they let their trades get away from them. Is your signal provider letting trades get 300 pips or more against them at times? Do they close trades the minute they turn into profit? If so this is a trader who does not understand risk and reward and should not be considered to trade real money.
c. Does your trader add to losing positions? Generally someone who is doing this is trying to average down their entry point and is setting themselves up for failure. Make sure when they do fail that your money is not on the line.
5. Choose a signal provider that suits you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. This might be OK with you. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader.
This is only a simple guide for you to consider when looking for good third party signal provider. Remember to always trade a demo before a live account and that ultimately the money is yours and no matter what happens to it, you are the one who's responsible for it. - 23212
posted by X - Men @ 10:48 AM
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