Forex signals exist to simplify traders’ lives and to help people make money without actually trading for themselves. Although this may sound too good to be true, it does describe the nature of any forex signal service. So, what’s the go with choosing a forex signal service?
First, let’s break down why you should use forex trading signals. Copiers prefer forex signals because they’re simple to use. You register with a social trading network or a signal provider, choose a strategy or trader, then those trades get copied into your account. Sounds great, right? Unfortunately there are a few hidden difficulties that should be discussed before you jump right in, such as:
- Past results don’t guarantee future performance.
- Many strategies won’t suit the size of your portfolio.
- Slippage can significantly affect the profitability of short-term trade signals.
Now, how do you find a good signal provider? Now, this depends a lot on the size of your account and your personal investment goals. For the majority of investors, choosing a stable strategy that generates 5-10% per month is more important than gaining a random, on-off profit of 2-300% that’s often accompanied by sharp drawdowns. Also, it’s often a good idea to build a portfolio of signals so as to diversify somewhat. For smaller portfolios, it’s important to look at the frequency of trades and a strategy’s volatility to make sure you won’t experience significant drawdowns.
Forex signals can be received by users via a variety of different channels, from email subscription to SMS or automatic copying. The first two options require the end user to implement the trades themselves when they receive the email or SMS. In these methods, the signal receiver has more discretion as to whether or not to trade a particular signal. This also means that the signal receiver always has to be alert as they don’t know when a particular signal will arrive, and must open the trades quickly in order to capture profits.
In auto trade copying, the signals are placed faster and don’t require any action from the recipient. This can be a quite passive way of investing as you don’t need to actively check on your account, only when it’s convenient for you.
There are plenty of forex signal trading services out there, both paid and free so it’s important to understand that you need to thoroughly research which are best suited to your requirements.
Source: Vantage FX Blog