The decision to utilize a trading Forex signals service to trade the Forex market will inevitably prompt a trader to ask certain questions. It stands to reason that the signals delivered from a viable signals service provider are generated via a successful and robust trading strategy.
So, the first and most obvious question is: why does a professional Forex trader sell trading signals of a successful trading strategy to others when profits can be made from trading the strategy instead? – This activity seems counter intuitive from the perspective of the trader providing the Forex signals. However, there is an incentive for profitable traders to sell trading signals.
Paid Forex Signals Providers
All trading strategies, no matter how profitable and robust, are going to experience drawdown and loss phases. During these drawdown/loss phases, traders that sell trading signals can partially offset losses from trading the Forex strategy with the revenue from the trading signals subscriptions.
This creates an incentive for professional Forex traders to sell valid and quality Forex signals to maintain a steady additional revenue stream from the underlying Forex trading strategy. Consequently, the likelihood that paid Forex signals providers are valid is at minimal incentive driven.
Paid Forex signals providers will need to justify to subscribers what they are paying for. Before committing any subscription, potential subscribers will demand a strategy performance record of actual trades, as well as back-test results for strategies that are recently developed.
A summary of how the signals are derived may also be provided including the indicators used, the fundamental metrics used, the chart time-frame, and a risk management profile – The more information that is provided to potential subscribers, the greater the level comfort they will have.
Free Forex Signals Providers
If a trader decided to uses a free Forex signals provider, caution and extensive due diligence are a must.
Traders should determine why the service is free and make certain that it’s not because it’s operated by a young amateur “wannabe” Forex trader that is flipping a coin in a basement office to determine what position to take and posting the Forex signals on the internet.
If a Forex signals provider is not willing to divulge information, this should give a potential subscriber pause. On the other hand, it may be a legitimate Forex signals provider that has only recently started the business and does not yet have a viable track record to show potential subscribers. It may be that it is offering free subscriptions on a trial basis as lost leaders to attract business. Rest assured that once the viability of the signals is established, the service will cease to be free.
In conclusion, whether the service is free or paid, always start with a small amount of capital in a real account to ensure that the advertised results are correct. Once the signals show consistent profit over one or two months, then increase the scale by moderate intervals while maintaining proper money management.
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