Choose A Signal Provider That Suits You

Category: Finance, Currency Trading.

With the growing popularity and easy access to the foreign exchange( ForEx) market, more and more people are drawn to it as their financial vehicle of choice.

This includes all kinds of software, trading systems for sale, videos, books, and third party signal party providers. Along with this popularity come all the extras. Today I m going to touch on a few points when seeking out a third party forex signal provider. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. You can have several signal providers trading your forex account or just one. At first glance a trader may look like a home run.

Like anything else, all third party signal providers are not created equal. That same trader may well end up completely torpedoing your entire account in one afternoon. These guidelines will give us something to look for when choosing our third party signal provider. To help make sure this doesn t happen we ll set down a few guidelines. The first thing I look at is weather the trader is a winner or a loser. The next thing I look at is how long they have been a winner.

This may seem obvious to nearly everyone, but I often see losing signal providers with 50- 100 people trading their signals. If a trader has been winning for a week that means nothing to me. Any one can place a few good trades one week and get lucky. I recommend that you don t trade any signal provider with less than a few months of results to show you. If you are going to be trading this trader s signals they need to be established. This is the largest peak to trough draw down in equity that the trader has historically had.

Look at the max draw down. Some traders refuse to take a loss. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. This causes them to hold on to losing trades forever or until they turn to a winner. If it doesn t turn in your direction, you will have your entire account destroyed by a trader that could have taken a 30 pip loss but held on until it was an 800 pip loss. They will be displayed right on the main screen of signal providers to choose from.

The first three are easy to look at. Once you get a few signal providers you are thinking of using, its time to dive a bit deeper into their history. 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? Look at their actual trades. They may have 20 winners in a row. Not as impressive is it?

This looks great, but if you look a bit deeper you will see that its really only 1 winning trade places 20 times. Look at their draw down on individual trades. This is a trader who lets their losses run out of control and cuts their winning trades short. Do they let a trade go 300 pips against them and then close it out when it hits 5 pips of profit? It s not a trader that you want in control of your money. A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.

Do they add to losing positions? Choose a signal provider that suits you. This might be OK with you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader. You should always trade a demo account before opening a live account with real money.

These are just a few things to look for when choosing a third party signal provider to trade your forex account. Remember it s your account. In the end you choose the signal providers, and you are responsible for what happens.

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