Even though I preach every trader to strive to become an independent trader, it’s a much easier thing to say than do. Everyone needs to start somewhere, right? Some start their Forex career blowing multiple accounts, entering a mentorship program or multiple signal groups to no avail. More often than not, the majority of novice traders elect for signal groups. You find a profitable trader, you enter every trade they enter, and you make the same profits, right? This is a no brainier, everyone should use signals! WRONG. Most traders soon find out that although the signal service is reporting profits, their trade logs and account balance indicate no such thing. So what’s wrong? Is the signal provider falsifying their results? Maybe.
There are some reputable providers out there, so let me suggest an alternative reason. Maybe, just maybe, you are using signals the wrong way. Signals should never ever be used as a copy and paste type service, even though many gurus like to market them that way. Signals should be used as TOOLS.
So how do I use signals to increase my profitability? I am going to set out some clear guidelines on how to first assess and choose a signal service, and secondly how to use the signals as a tool.
How to choose a Forex Signal Service Provider
- If they do not have a website, be cautious. There are a lot of gurus on Instagram ready to scam newcomers to the industry with their bogus signals and eBooks. Most of these individuals do not have a functioning and well-established website.
- If they have a free group, join it and try them out for at LEAST one whole month. Take note of their risk to reward ratio. Are they risking 60 pips to only make 20? If so, run away. Also check how often they enter and exit a trade. If they are continuously entering and exiting trades, be cautious. This indicates that they are not confident in their analysis and are showing signs of impulsiveness.
- See if they post/track their signal performance on a weekly and monthly basis. If they do, great. Now you have to verify these trades and the performance they claim. If all checks out that’s fantastic, you may have found a profitable service.
- Lastly, read reviews and see what other users say about their service. A solid review with no obvious bias is what you want to look for.
Now that you have chosen a signal service, how do you end up using the signals as tools?
How to use Forex Signals as a Tool in your Trading Strategy
- Once you have a signal sent to you, do not do what everyone else does, and that is to carelessly enter the trade.
- Instead you should pull up the charts on your computer or your mobile device and take a few minutes to see what your own analysis is telling you.
- If the signal and your own analysis agree on the trade, you have more confidence in placing the trade. If the signal plays out as as winner, then great. Your analysis was spot on, and you should see what you did right and try to replicate it the next time around.
- If the signal and your own analysis are conflicting, I suggest you to either wait for further confirmation or to not take the signal at all. If the signal indicated a long, but price ended up falling, you would be able to see where the analysis went wrong and why you were correct.
- Over time you will start to realize whether your analysis needs improvement, or the signal service you signed up for isn’t all that profitable.
Using these rough guidelines, you will be able to find the most profitable signal provider and use their signals for added confluence for entering a trade. Overtime, you will be able to see what the great trades see, and eventually become your own Independent trader who does not rely on signals. I hope this helps some of realize how signals should be used, and how they can be used to benefit you in the short term as well as the long term.