Signing up with over 20 forex trading forums on Facebook, I most times get overwhelmed with a bunch of signal links flooding the comment box proposing accurate trading signals.
Mostly by Telegram, these providers promise very high pips, some about 2000-2500 pips per month, 95%-99% accuracy, 100% guaranteed returns and all. If you’re on one of these forums on Facebook, then you probably have seen these links.
The frequency of such postings is worrisome making it difficult to sift genuine ones from the pack. These offers though attainable as they claim, could rob you off your sleep if you’re a conservative investor.
My thoughts are…what if all the guarantees end up being a wild goose chase? What are the assurances and security if all goes burst?
If you’ve tried these signals and it worked for you, then you’re lucky and that’s okay. However, this article seeks to point out some red flags even from a glance, and how to sift third party signals that know what they are doing from the ones that are just in for the flow.
With new forex third party providers showing up on social media every day, one needs to be careful who to trust.
Before examining the pointers, it is important to know who a forex third party signal provider is.
Brief on Forex Third Party Signal Providers
A forex signal provider is an experienced trader of a set of forex traders that recommend a set to trades with the exact details of when to open and close a trade or set of trades in real time.
These signals are usually transmitted through exclusive forums and closed groups which other traders only gain access to through weekly or monthly paid subscriptions.
Telegram is often a platform for third party forex signals with a capacity to take up to 5k members for a super-group. Signals or alerts are shared on the platform to other registered traders to implement on their own account.
These providers also offer account management with proof of previous winning trades which is of course exciting and a shrewd marketing tool.
Forex signals can either be Free or Paid which indicates that benefits differ. We will touch on this aspect much later. Let’s examine what to look out for when choosing a forex third party signal provider.
Pointers – Forex Third Party Signal Providers
Examine Losing Trades
This is of course where every potential investor will look at. Also know that signal providers are a step ahead and are prepared for your enquires. Verify their statistics usually audited for bigger and more established providers. These records give more credibility and trust.
For midlevel signal providers, communication can be more interpersonal. Many explore and reach out to prospects via email, Facebook and mostly Telegram. A common feature is an often-watermarked screenshot used as proof of winning used for advertising.
These screenshots are usually what you get but are not enough information in making a decision. Request to see losing trades and compare the ratio to winning trades. For example, if the provider has 3 loss days out of 5 trading days in a week, and this is seen on a consistent manner over a long period, then you should probe further.
Examine Winning Trades
How long has a provider been winning (win rates)? Look at winning weeks in a month and for several months? Examining trading history will give you an insight into the kind of signals you’ll receive.
I recommend that you don’t trade any signal provider with less than a few months of results to show you. A new forex signal provider can place a trade for a week and get lucky and use that result as a basis to sell signals to the public.
Why you need to focus on losing trades is to see the extent of hit you could get if his signals go against you, it won’t be win-win all the time.
You should factor in the percentage of potential losses when they do occur. 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.
Look at the pips down the losing slope, some traders hold on to a losing trade hoping a reverse action will occur.
For instance, 600 pips downwards is high and could erode profits and progress for a whole week. Such risk levels and trading pattern could blow up a small sized account.
SEE ALSO: How to Place a Stop Loss During Trades
Compare Signal’s Risk Level and Lot Size
Some providers recommend a minimum of $1000 to apply their signals, this should tell you something about their trading strategy.
It’s possible that they could be swing trading and not scalping like day traders. This strategy often requires well-funded accounts to be able to adjust to the volatility of the market.
So, examine the trader’s trading lots to know the amount of risk his is taking. A lot is the smallest available trade size a trader places when trading currencies. Brokers refer to lots on an incremental scale often in a 1000 or a micro lot. Lot size directly indicates the risk and impact on a portfolio.
Are you willing to invest huge sums to be able to trade larger lot sizes? You must understand this to know what to expect when choosing a forex third party signal.
Examine Risk to Returns Ratio
Some providers may take a bigger risk and provide sizeable returns in the long run. But taking huge risks could lead to large drawdowns.
Are you in for the short term or you could wait even when your account is 700 pips below the curve? Can your heart take all in? If you’re the conservative type, I recommend taking it a step at a time.
There are no guarantees in the forex market as there are many influences impacting on currency pairs at the tick of the clock. No technical and fundamental analysis is infallible, so place your trades in bits and move up gradually.
FREE or PAID Signals, which is Best for Me?
Everyone loves freebies, but we are talking money here and serious business. No one is going to be held accountable when it’s free and the provider bothers less how your trades turn out. Free signals should be tested or used to evaluate your trades and not to be relied on completely.
When Forex signal providers are starting out, they could offer free signals to build clients or subscribe base. Once they gain steam and begin to see positive results and testimonials from users, then a PAID service is introduced. So, nothing is really free, it takes money to make money.
PAID forex signal providers are more reliable and they are mindful of their reputation and as such treat their clients with utmost care. The success and continuity of their business depends on the positive reviews they get from users of their service.
They often offer a free trial period for users to get familiar with their signals. The more established ones offer moneyback guarantees if you’re not satisfied after the trial period is over.
If you’re a beginner and wish to minimize errors, I recommend going for a PAID signal service.
A Third Party Signal we Recommend
Having considered the above, one way to test out your potential forex signal provider is to trade a demo account. You should test out these signals on a demo account especially if you’re a beginner before implementing on a live account with real money.
Credible and established forex signals with long history of high win rates are within reach if you know where to look.
To save you time, you may want to try our #1 Forex signal provider with 50 years combined forex trading experience. If you’re in for quality, these guys are the BEST for the following reasons.
- Verifiable trading records.
- Round the clock access to live trading room.
- Experienced coaches work across every trading session.
- Clear entry and exit plans.
- Help identify strong currency pairs to trade.
- Scan multiple markets for Naked trading opportunities.
- Exclusive indicators available to only members.
- Helped 67,000 traders since 2012.
- #1 Forex Channel with 219k YouTube Subscribers.
- Suitable for beginners.
Identify with winners, and get it right from the start.
We have tested many third party signals and we are yet to find one as good as ForexSignals.
You may wish to signup for a 7-Day Free Trail and a trader/coach will be assigned to you ensuring you start out right and move up quickly.
Remember it’s your account. In the end you choose the signal providers, and you are responsible for what happens.
Wish you a successful trading.