Using a forex signals provider can be exciting for some. For others, having used a forex signals service already and having met with some disappointments, one can get skeptical about using such a service already.
This brings the question whether one should use a forex signals service. It also prompts the question whether a forex signals provider can generate profits or equity growth for you.
So what are the factors to look for when choosing a forex signals provider? This article explores in detail and gives a few tips on how to choose a forex signals provider.
Age of the account
Seasoned traders will know that at some point in trading, a trader will no doubt undergo a winning streak. This is often followed by a losing streak. It takes a lot of experience to be able to maintain consistent profits when trading forex.
Therefore, the first thing to look for when choosing a forex signals provider is the age of the account. Start by looking at signal providers who have a track record of at least three years. This will tell you the experience of the trader themselves who is managing the signals. It will also show you how consistent the signals provider has been in the past three years of trading.
Some forex signal providers actually use a forex cent account. A cent account, as the name implies allows you to trade in cents. This means that there is very little risk. Copying traders from a cent account to your real trading account with even $500 in equity can be a bad bet.
Pay attention to the trading equity of the forex signals provider. In most cases, you will already know upfront on the ideal trading capital and leverage that you should use. This ensures that the lot sizes are appropriate. It will also ensure that your account is closely mirrored to that of the signals provider.
Understanding how the signals provider trades (based on their history) will give you a lot more insight. For example, signal providers typically trading in single lots. However, you might find someone scaling in or out of a position. The bottom line is that traders need to also focus on the money management skills of the signals provider and not just how much returns they generate.
Not all forex brokers are the same. Therefore, you must ensure that the signals provider and you use the same forex broker. This will ensure that the slippage and spreads will not influence your bottom line profits. The speed of execution also matters.
Using a different broker from the one the forex signals provider is using can result in the target levels not being hit and so on. This can quickly translate to losing positions merely due to the spreads involved.
However, if you come across a signals provider that does a splendid job but trades with another broker, then you can always ensure to adjust your trade levels by considering the spreads to minimize losses.
Don't fall for 150pips marketing hype
It is common to come across signal providers who advertise on the average number of pips they make. This can be a great way to attract gullible traders into signing up for the forex signals service.
Instead of focusing on the number of pips a signal provider makes, consider the overall profits that they have made. Paying attention to metrics can also help. Drawdown is an important metric that should not be ignored when choosing a forex signals service.
The drawdown will tell you the potential losses your account might make in pursuit of the profits.
There are different types of forex signal providers. Some send the trades via SMS or email while others fully automate the process. You would just have to install an EA or a script to automate the trading.
Choosing one of the above is a matter of personal choice. Therefore, traders should explore these options very carefully. No matter whether you want manual forex signals or automated signals, ensure that you always stay in control of your equity and the risks.
There are quite a few successful forex signal providers out there. It is somewhat akin to finding the best forex broker. For traders, this means that they need to put in some work and research into the forex signal providers in order to find a service that best matches their interests.