With so many Forex brokers in the marketplace, how do you know which one is right for you?
This is a pretty open ended question and everyone will have a different opinion, so you need to start by asking yourself what you want from a broker.
Depending on your level of experience and the time you’re able to dedicate to trading, a broker that offers trading signals or automated trading might be the best forex broker for you.
For those who are interested in trading the forex market but are time-poor, automated signal trading can be a great option, or even for those who actively trade, it can be a handy contributor to your current portfolio of trading strategies.
An example of a broker that offers clients access to automatic trading signals is Vantage FX. By offering clients access to both ZuluTrade and MyFXBook automatic trading, amateur and experienced Forex traders alike can take advantage of the expertise of others by subscribing to the tried and tested strategies of others, and automatically take the trades that signal providers are taking.
Let’s take a look at the signal platforms that a good Forex Broker should have to offer.
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The images above show a few of Zulutrade’s and MyFXBook Autotrade’s list of trading signals that are able to be followed. There are many to choose from, so let’s discuss a few crucial stats that you should look out for.
First and foremost, if you’re looking for a signal provider, you should make sure they’re trading a real account, with their own money. This ensures that they have ‘skin in the game’ so to speak, so they hopefully will have the preservation of their own capital as the highest property. Some demo trader’s equity charts or P&L may look impressive, but they’re not trading with real money and should typically be avoided.
Providers who are trading a real account should also have a long-term proven track record, ideally at least 12 months of profitable trading.
Secondly, you should look for a trader with a low historic drawdown. Everyone has a different tolerance for risk, but as a general rule of thumb, a drawdown over 20% is something you should avoid. Personally, over 10% is hard to stomach, and can wipe out an account when combined with multiple signal providers.
The third thing to look for is a high average pips per trade gain. Don’t go chasing signal providers with a high win rate, that only manage to take 3-4 pips per trade. Slippage between their broker and yours, unless they’re a reputable Forex Broker like Vantage FX, you can lose too many pips per trade.
This is up to personal preference, but generally speaking, look for manual traders as opposed to those who trade an EA. Or at the very least, will intervene when their EA gets a bit too carried away.
Another important thing to watch out for, is the maximum number of trades that are open at any given time. If there are many, you’ll need a higher account balance in order to sustain the equity required across multiple trades. Also, you’ll need to be very careful that a signal provider doesn’t double down on a losing trade. This can sometimes will turn out ok, but in the long run it will almost certainly result in a margin call.
You’ll also have to make sure that your broker supports the instrument that the signal provider trades.
As you can see, there are quite a few ‘watch outs’ when it comes to choosing a signal provider, but if you do your due diligence and ensure that the one you choose is trading a real account and their own money, has limited drawdown and a decent average pips per trade gain and a reliable forex broker, trading signals can be a welcome addition to any trading portfolio.
Source: Vantage FX Blog