Forex Signal Providers - What To Consider
The foreign exchange market, or ForEx, has attracted many people and many of them have made it their financial vehicle of choice. With the markets new popularity, there are certainly some extras to consider. Books, videos, software, trading systems and third party signal providers. Today, I will tell you about some things that you should consider when selecting an excellent third party signal provider.
In order to choose the proper third signal provider, we should have a nice understanding of what a third party signal provider really is. A third signal party provider is an analyst or another trader that facilitates trades that are placed on your account. You can choose to have several signal providers 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. Is your signal provider a winner? It would seem that no one would trade the signals of a losing trader, but still I see losers with a big following from time to time.
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. Look at the max draw down. This is the largest peak to trough draw down in equity that the trader has historically had. Some traders refuse to take a loss. This causes them to hold on to losing trades forever or until they turn to a winner. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. 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.
4. You should be able to spot any traders that meet our first three guidelines. Once you have some traders that you are considering using you should take a closer look at some of their stats.
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. Do they add to losing positions? A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.
5. Make sure that the signal provider that you choose is suitable for your risk tolerance. Choosing a very aggressive trader will not work for a very conservative investor no matter what the win rate.
These are just a few things to look for when choosing a third party signal provider to trade your forex account. You should always trade a demo account before opening a live account with real money. Remember it's your account. In the end you choose the signal providers, and you are responsible for what happens. - 23226
In order to choose the proper third signal provider, we should have a nice understanding of what a third party signal provider really is. A third signal party provider is an analyst or another trader that facilitates trades that are placed on your account. You can choose to have several signal providers 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. Is your signal provider a winner? It would seem that no one would trade the signals of a losing trader, but still I see losers with a big following from time to time.
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. Look at the max draw down. This is the largest peak to trough draw down in equity that the trader has historically had. Some traders refuse to take a loss. This causes them to hold on to losing trades forever or until they turn to a winner. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. 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.
4. You should be able to spot any traders that meet our first three guidelines. Once you have some traders that you are considering using you should take a closer look at some of their stats.
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. Do they add to losing positions? A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.
5. Make sure that the signal provider that you choose is suitable for your risk tolerance. Choosing a very aggressive trader will not work for a very conservative investor no matter what the win rate.
These are just a few things to look for when choosing a third party signal provider to trade your forex account. You should always trade a demo account before opening a live account with real money. Remember it's your account. In the end you choose the signal providers, and you are responsible for what happens. - 23226
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posted by X - Men @ 4:00 AM
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