The average turnaround time for training of new traders from scratch to the first stages of market success is estimated to be about 18 months, according to the head of prop trading firm OSTC. Most of today’s retail traders do not have 18 months to spare. They want in on the action and they want it now. Furthermore, there are probably more schools training doctors than there are training the next generation of independent financial traders. So the only option left for most of the retail traders who aspire to get a chunk of what the guys at the big banks are making, is to make use of forex signals services.
However, there are unique problems with this route. Firstly, there are now hundreds, if not thousands of signals providers on the internet. The forex signals industry is unregulated. There are no industry standards to gauge performance of signals providers. Anyone can simply wake up one morning, and start offering forex signals to the public, charging colossal sums of money in the process. The experience of many traders who patronize many of these signals providers has been very bitter, to put it mildly.
Then there is the issue of whether the technology available to this sector of the market has kept up with the technological tools of today. Since the advent of the first forex signals services in 2006, a lot of technology has been introduced into the market. To what extent have FX signals providers leveraged on these technologies to improve their product offering?
These are the major issues confronting traders who intend to patronize forex signals providers. With no standardized filters to sift out the good ones from the bad ones, traders must resort to developing means of selecting the most accurate forex signals providers.
Tips for Choosing an Accurate Signals Provider
Many traders are confused as to the metrics they should use in selecting an accurate signals provider. We have tried to simplify the process by pointing out some of the very salient points that must be examined.
- Conservative or Aggressive?
Some signals providers adopt very aggressive tactics which are not usually favourable for beginners. This is at one end of the spectrum. There are signals providers who tend to be too conservative; these tend to leave a lot of trades and money on the table. Then there are those who strike a balance and hit it just right. Signals providers who are too aggressive in their approach tend to take many trades that carry a lot of risk. They suffer high drawdowns and because many new retail traders do not come to the market with a lot of capital, such trades expose them to excessive risk.
How can a trader know a signals provider who is very aggressive? Providers sometimes provide their trade results on 3rd party verification websites like Myfxbook. If you check the metrics, you will see things like very steep profit graphs, high drawdowns, and accounts that were quite close to ruin before a magical recovery.
The best situations should see graphs which rise gradually in a sustainable manner (as opposed to steep or zig-zag patterns), have a record that lasts at least 1 year (which shows how sustainable the provider’s system is), and should also reflect a believable result pattern.
- Verifiable Results Analysis
Look at this graph and the trade stats on the left.
The profit growth chart (red line) shows a smooth graph which is ascending gradually (which shows a signals provider that is not too conservative and not too aggressive). The equity growth chart (yellow line) was also in sync with the profit growth line. Furthermore, a 91% rate return for the period under consideration is not bad at all. Now compare this with the chart below.
The first thing that jumps out is the steepness of a segment of the profit growth chart, and the sharp drop in the equity growth chart during the same period that we saw a steep rise in profit growth. What does this say? The equity dropped so badly that the signals provider was forced to virtually use the entire account capital in risky trades to attempt a recovery. That is why the profit growth chart got very steep, and that is why we see a profit stat of 1,775%. Looks chunky, but such accounts do not last and it does not take time for such signals providers to run aground.
A mention must be made of signals providers who do not even provide any trade results for assessment. Such providers must be avoided totally.
- Realistic Returns
If any signals provider starts to make outlandish profit claims or starts to quote figures and performance data that are either too good to be true or cannot be independently verified, please do well to run away from such providers. It is far better to use providers who provide realistic results. You’ve all heard the saying: if it looks too good to be true, then it probably is.
Beware of providers that tout the so-called “no loss” systems. There is no system or trader that has never made a loss. It is about being profitable over the long-term and in a consistent manner.
- Free Trial
Choose providers that offer free trials. You need to be able to see for yourself if the signal provider’s services are worth paying for. The free trial period enables you to evaluate the services of each signals provider.
- Seamless Delivery Format
Once you have got signals providers that meet the first four criteria, you can use this one to sift out the best in terms of delivery of signals. There is no point in choosing a provider whose signals are delivered late, or delivered in a confusing format. Signals should be delivered in a format that is actionable and clear so anyone can use it. You should not have to go to a special school to be able to interpret signals. If this is the case, choose another provider.