Third Party
Forex Signal Provider Tips
     
 
Choosing A Third
Party Signal Provider That Works For You
With
the growing popularity and easy access to the foreign
exchange (ForEx) market, more and more people are drawn
to it as their financial vehicle of choice. Along with this
popularity come all the extras. This includes all kinds
of software, trading systems for sale, books, videos, and
third party signal party providers. Today I’m going to
touch on a few points when seeking out a third party
forex signal provider.
Before we get into choosing a provider we need to have a
good understanding of what a third party signal provider
is. A signal
provider is a trader or analyst that generates trades
that in turn get placed on your account. You can have several
signal providers trading your forex account or just one.
Like anything else, all third party signal providers are
not created equal. At first glance a trader
may look like a home run. That same trader may
well end up completely torpedoing your entire account in
one afternoon. To help make sure this
doesn’t happen we’ll set down a few guidelines.
These
guidelines will give us something to look for when
choosing our third party signal
provider.
-
The first thing I look at is weather the
trader is a winner or a loser. This may seem
obvious to nearly everyone, but I often see losing
signal providers with 50-100 people trading their
signals.
-
The next thing I look at is how long they
have been a winner. If a trader has
been winning for a week that means nothing to me.
I
recommend that you don’t trade any signal provider
with less than a few months of results to show you.
Any one
can place a few good trades one week and get lucky.
If you
are going to be trading this trader’s signals they
need to be established.
-
Look at the max draw down. This is the largest
peak to trough draw down in equity that the trader
has historically had. Some traders refuse
to take a loss. This causes them to
hold on to losing trades forever or until they turn
to a winner. Turning a loser into
a winner sounds great, but it will eat up a huge
chunk of margin and may never turn around.
If it
doesn’t turn in your direction, you will have your
entire account destroyed by a trader that could have
taken a 30 pip loss but held on until it was an 800
pip loss.
-
The first three are easy to look at.
They will be
displayed right on the main screen of signal
providers to choose from. Once you get
a few signal providers you are thinking of
using, its time to dive a bit deeper into
their history.
-
Look at their actual
trades.
Do they have a good win rate
because they have opened a ton of
trades all at the same time on
the same currency pair?
They
may have 20 winners in a
row.
This looks great, but if you look
a bit deeper you will see that
its really only 1 winning trade
places 20 times. Not
as impressive is
it?
-
Look at their draw down
on individual trades.
Do
they let a trade go 300 pips
against them and then close it
out when it hits 5 pips of
profit? This
is a trader who lets their losses
run out of control and cuts their
winning trades short.
It’s
not a trader that you want in
control of your money.
-
Do they add to losing
positions? A
trader who constantly adds to
losing positions hoping it will
turn for them is not someone you
want trading your account.
-
Choose a signal provider that suits
you. Some traders may
provide larger returns over time, but take bigger
risks leading to bigger draw downs.
This
might be OK with you. If you are
more conservative and cannot stomach large
drops in equity you probably should choose a
more conservative trader.
These are just a few things to look for when
choosing a third party signal provider to trade your
forex account. You should always trade
a demo account before opening a live account with real
money. Remember it’s your
account. In
the end you choose the signal providers, and you are
responsible for what happens.
To begin looking through a list of signal
providers and choosing who is right for you, visit
Zulutrade.
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