An increasing number of people are choosing forex as their preferred financial vehicle as the forex market gains more popularity and easy access. All kind of excesses including all kinds of third party signal providers, videos, books, trading systems, and softwares also come with this popularity. Hence, I am today, going to outline a few points to note in your search for a provider of third party forex signals.
A good understanding of what ‘third party signal provider’ means is essential and we’ll have to get it before we explore how to choose one. A signal provider can be said to be an analyst or trader that produces trades that become placed in a client’s account. It’s possible to have a single or more than one signal providers.
All providers of third party signal, like everything else, aren’t born equal. It’s common to find a trader who initially looked like a home run entirely torpedoing your account in just one occasion. The following guidelines drafted to ensure such doesn’t happen will give you things to watch out for as you seek out a provider of third party signal.
1.Find out if the trader is a winner or a loser. Though this may look obvious to all, but upon checking out 50 to 100 people trading their signals, I often see losing signal providers.
2.Find out how long they’ve been winners. It’s nothing to me that a trader has been winning for a week. My recommendation is that if a signal provider doesn’t have a few months of results to show, you shouldn’t trade with them. Any trader’s signal you trade must be one that’s established, not someone who got lucky on a few good trades.
3.Check out the max draw down. This refers to the largest peak to trough draw down in equity that a trader has had historically. Many traders don’t take a loss resulting in them holding on to losing trades for eternity or till they eventually turn into winners. It sounds great to turn a loser into a winner but a huge chunk of your margin will be eaten up and it’s possible it won’t ever turn around. An in the event that it doesn’t turn around, you would have destroyed your entire account because the trader held on till it was an 800 pip loss instead of simply taking a 30 pip loss.
4.It’s easy to spot the first three since they’ll be displayed on the main screen of the signal providers you intend making a choice from. The minute you’ve identified a good number of providers from which to choose, you should then delve deeper in to their histories.
a.Look at their actual trades. Is it due to the fact that they opened a large number of trades on the same pair of currencies at the same time that they have a good win rate? 20 winners in a row looks great but it may just be one winning trade placed 20 times if you look a bit deeper and that’s not impressive.
b.Examine their individual trades’ draw down. If they’re he kind of traders that allow their losses run out of control (e.g. 300 pips against them) and cuts their winning trades short (e.g. at 5pips of profit), you shouldn’t let them be in control of your money.
c.Do they make additions to losing positions? You don’t want anyone who adds to losing positions with hopes it will turn for them in charge of your account.
5.Select the signal provider who suits you. You may be okay with a trader who over time provides larger returns but gets bigger draw downs due to taking bigger risks and so choose such a trader over a more conservative trader. Or you may not be able to stomach such large drops because you’re more conservative and chose the conservative trader.
The above listed are only a few of the things to put into consideration when searching out a signal provider who’ll trade your forex account. Before opening a live account with money, be sure to always trade a demo account. Since it’s your account, don’t forget that after choosing the signal provider, you’re responsible for what happens.