With many Forex signal providers to choose from, picking the right one that suits all your needs is far from an easy endeavor. Although the overall profitability of the signals is what most traders are looking for, there are also additional features of signal providers that can affect your trading success. Profitability is important, but risk management, verified results, the type of signals and additional support shouldn’t be neglected as well. In this article, we’ll give 9 important tips for picking the best Forex signals provider so you can enjoy a long-term and successful business relationship.
1. Signals have to be profitable organically, our list has to start with the most crystal clear tip –
the trades sent out by the Forex signal provider have to be profitable. Many signal providers claim to catch up to a few thousand pips per month, but without a verified track-record those numbers shouldn’t be taken seriously. Furthermore, if a provider “guarantees” a fixed amount of pips per month, you should cross that provider from your list. Markets are unpredictable, and even large market participants such as hedge funds and investment banks with hundreds of professional traders do report a losing month from time to time. There is no guarantee in profits, and this needs to be an early warning sign. In addition, profitability can’t be discussed without mentioning risk. The number of net pips caught per month needs to be put in relation to the maximum drawdown of the signals and their reward-to-risk ratio. If a trade makes 100 pips but the potential loss is twice that large, the maximum drawdown over a certain period of time should not be underestimated. Some Forex signal provider offers "big stake exchanges", which are trade setups with a risk assuming the ratio of 10-100 or more and which occur rarely in the market. In fact, a recent study of a large Forex broker states that trades with a reward-to-risk ratio lower than 1 are around three times less successful compared to trades with higher R/R ratios. You might need to keep this in mind when picking your Forex signals provider.
2. Check for confirmed & verified trading results
The asserted benefit of a signal provider doesn’t mean much without confirmed trading results. A confirmed & verified track-record ensures that the claimed performance is real and verified by a third-party. The social trading platform of Fxhubs & InvestTipsters and its Popular Investor program is also a great source of signal providers with verified track-records. Another significant thought is whether the signal provider uses a demo account or a real account. Normally, brokers are more convinced to follow a signal when the signal provider uses the real account and also opens the trades himself. Some signal providers publish hypothetical or simulated track-records of their signals, which means that their signals weren’t opened in the real market.
3. Do the signals include charts or remarks(comments)?
A best Forex signals provider should provide charts and comments together with the signals. Some providers use mechanical systems to generate their trades, which are often sent out just in a basic form that includes the entry price, the stop-loss level, and the take-profit level. Usually, those trades are not hand-picked, as the system uses simple technical rules to generate buy and sell setups. These types of providers provide charts and remarks (comments) that accompany the signal itself, so you’re fully aware of the reason why you’re entering a buy or sell position. This is also a great way to learn along the way, as you get valuable insight into how the market works and why the provider thinks that the trade should play out well. On the off chance that you get the opportunity, look for a Forex signal provider that provides charts and comments with the signals.
4. Try to Sign-up for a free trial first A straightforward and profitable
Forex signal provider should offer a free trial for his customers. Free trial periods are a great way to assess the quality of the signals, and most traders would consider going for a paid subscription if the signals during the trial period shown to be profitable. Let’s face it – a signal provider with low-quality and unprofitable signals (usually without a verified track-record) won’t offer a free trial period for his potential clients as most of them wouldn’t convert by the end of the trial. Try not to buy a pig in the poke and twofold-check signal providers which don’t offer a free testing period. Free Signal trials are usually provided for a period of one to two weeks, which is sufficient to assess whether a signal provider is worth considering or not.
5. Make Ensure the trades match your trading style.
The kind of trading signals provides u by a signal provider should suit your trading style. Check the number of trades that the provider sends out during a day – a large number of trades signals that the provider uses a relatively short-term trading approach, while a lower number of trades usually suggests that the trades are based on longer-term setups. Another way to assess whether the trades are short-term or long-term is by analyzing the size of the stop-loss and take-profit levels. Short-term trades call for tight stop-losses (up to 100 pips), while long-term trades need wider stop-losses to withstand the negative price fluctuation. The time-horizon of the trades is important because long-term trades usually work better than short-term ones. However, if the signal provider uses a short-term approach and has a successful and verified track-record, then the choice is up to you depending on your personal preference for short-term vs. long-term trading. Signals can also be grouped by their underlying market analysis. Most signal providers base their trades on technical analysis, and a few of them combine fundamentals to identify high-probability trade setups. In the long run, trades that are based solely on technical analysis tend to underperform trades that are based on a combination of technicals and fundamentals. Additionally, some Forex signal providers also cover commodities such as gold and oil, which is a great way to diversify your trading portfolio and reduce the overall exposure to currencies. Commodities are known to move inversely to the US dollar, which can lead to additional trading opportunities and risk reduction.
6. Signals should match your time-zone(your suitable time)
The time of the day when the signals are sent out should match your time-zone. You don’t want to pick a signal provider who doesn’t trade during your time-zone and sends the signals out in the middle of the night (your time). Of course, the time the signals are delivered also depends on the Forex market hours. The Asian session usually provides lower volatility compared to the European and US session, which in turn calls for lower profit-targets. Most signal providers are short-term based trade during the London and New York session, so make sure to be available to open the trades ones you receive the signals or search for a signal provider who matches your time-zone. You can find the exact time when the signals are sent out on the provider’s website. You can also sign-up for a free trial and check the exact times when the signals are delivered.
No comments:
Post a Comment