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 take advantage newcomers in the Forex industry with their bogus signals and eBooks. Most of these individuals do not even have a functioning and well-established website.
- If they have a free group, join it and try them out for AT LEAST an entire month. Take note of their risk to reward ratio. Are they risking 60 pips to only make 20? If so, run away. You may also take note how often they enter and exit a trade. If they are continuously entering and exiting trades, be cautious. Early exits are necessary at times, but if they do this often, it may indicate that they are not confident in their analysis and are showing signs of impulsiveness.
- See if they track their signals performance on a weekly and/or monthly basis. If they do, that’s a good sign. 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 Forex signal service provider.
Now that you have chosen a Forex signal provider, you will need to learn how to incorporate the signals to your own trading plan.
How to Use Forex Signals as a Tool in your Trading Plan?
- Once a Forex signal is sent to you, do not do what 90% of traders who use signals do, and that is to aimlessly enter the trade without plotting it out on a chart.
- Instead you should pull up the charts on trading platform via your computer or smartphone 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 Forex 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 Forex signal and your own trade analysis are conflicting, you should either wait for further confirmation or do not take the signal at all. If the Forex 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 see improvement in your analytical skills, watching these signals play out day in and day out. Practicing in the trenches instead of reading a book. Experience is how you become a better trader.
Using these rough guidelines, you will be able to find the most profitable signal provider and use their Forex signals for added confluence for entering a trade. Overtime, you will be able to see what the great traders see, and eventually you will become your own Independent trader who does not need to rely on Forex signals. I hope this helps some of you realize how Forex signals should be used, and how they can be used to benefit you in the short term as well as the long term. If you have any questions or comments, you may email [email protected]