Setting up your first Forex brokerage account and then shopping around for forex signal providers can be an exciting time for newbies. But for other traders who have encountered disappointment in using forex signals, it can be easy to become skeptical of all forex signal services.
But regardless of your personal experience, trading signals do have the ability generate profit and equity growth for your trading account.
This quick article details a few important factors you want to look at when examining your next potential signal provider.
It takes a highly experienced trader who has worked on their craft for years before they’re able to consistently turn a profit. Anyone can get lucky and go on a winning streak every now and again, which is inevitably followed a losing streak, but it takes time to develop the skill set of a seasoned trader.
Therefore, the first thing you want to look at when choosing a forex signal provider is the age of their account. How old is their website? Does the service offer any verifiable proof that they’ve been trading as long as they claim?
It’s ideal to find a signal provider who has been offering their services for at least three years. This will give you enough time to assess their consistency over a long stretch of time.
Some unscrupulous forex signal providers will actually use a ‘cent’ account to place their trades. A cent account allows you to trade in very small dollar amounts, presenting very little risk. If you’re copying the trades of someone who is using a cent account, you’re in trouble.
To determine if you’re following someone using a cent account or real account, watch the forex signal provider’s equity line, assuming they’re tracking their trades with a third-party software service like MyFxBook.
If their equity line is balanced and follows a believable trajectory, then you can almost be certain that they’re using appropriate lot sizes, which means they’re using a real trading account. Looking into the signal provider’s trade history, including lot sizes and finding out if they scale in or out of positions, are important in assessing their money management skills, not just how much profit and wins they generate.
This seems like common sense, but it’s often overlooked by traders using a signal service. Since forex brokers tend to be very different from one another, it’s a good idea to try and use the same broker used by the signal provider. This helps make sure things like slippage, spreads, and execution speeds will not severely impact your bottom line.
By using a different broker, you run the risk of missing key target levels and in the end, more losing trades. So, if you’ve found a list of strong signal candidates, try to choose the provider who uses the same trading broker and platform as yourself, assuming they also meet the criteria above.