Not everyone wants to spend time learning the ins and outs of the world currency markets in order to be able to profit from the amazing opportunities that Forex offers every day. Is there another way?
In a word – ‘yes’ – Forex signal services. These are nothing new in Forex trading, put simply, you pay someone else (a professional trader), to tell you when to buy and when to sell, and you trade those signals in your own account. Sounds great in theory – sign up, start trading their signals, and sit back and relax. Can it really be that simple?
Well, yes and no. If done right, trading someone else’s calls can be the most relaxed way to profit from the Forex market. But there are some pitfalls for the unwary, so let’s take a look at how to minimize the stress and maximize the returns.
First you need to find a Forex signal service that trades in a way that suits you. Will the signals given fit in with your ability to trade them? If the trader specialists in the Asian session and you are living in Europe, their trade calls at 3AM are not going to be of much use to you. Forex is a true 24 hour market and that means wonderful opportunities 24 hours a day. There is simply no need to get up in the middle of the night for fear of missing a trade, just find someone in the same time zone.
You should also consider how much discretion (or otherwise) you want to exercise over the calls made by the signal provider. Some advisors, send out a purely “mechanical” signal – when they say buy, you buy. For many people this is exactly what they want. Other traders may prefer to have more discretion and literally take advice – the Forex signal provider says “we would suggest buying here” – the trader then has to determine if the signal fits their own risk profile before taking the trade. Such a service is more useful for those who are intending to ultimately learn to trade Forex for themselves.
There is no “holy grail” in Forex trading, not in any market – In other words, there is no such thing as a trading system or Forex strategy that wins 100% of the time. However, before you start trading someone else’s system or strategy, you do want to have some idea of how successful they have been in the past. As all those investment fund ads say, past performance is no guarantee of future success, but at the same time if someone is trying to sell you Forex signals and they have been losing money every month since they set up in business, you will probably want to avoid them!
All Forex signal services will have some sort of track record published on their website, and the more detailed the better. You at least want to be able to see a breakdown of profit by currency pair, as their total figures are likely to include more pairs than you are going to be trading in one go.
There are two basic costing models:
- You pay the service a flat rate monthly fee, and in return they provide the signals. This is the most common scenario.
- You pay a “membership” fee to join the signal service, and then the monthly fee is based on a percentage of profits. This method is a very fair way of charging – if they have a bad month and don’t make a profit, you effectively don’t pay anything.
All of the services offer demo periods, some charge for this and some don’t. Those who charge usually do so because once you’ve started receiving their calls, you will have an idea of the way they trade – they are parting with knowledge so they need to compensate themselves for that.
It almost goes without saying (but we’ll say it anyway!), check out the support before parting with your cash. If you receive a trade signal and don’t fully understand it, you need to be able to get hold of someone who can enlighten you. This is especially true in the case of those Forex signal providers who charge based on a percentage of profits, because the profits are normally calculated on the assumption that you traded all the signals. Email support may be too slow when trades are on the line, a phone number or internet chat-room is better.
Lock-in or Education?
As we mentioned earlier, some Forex signal services are exactly that – they advise you which way to trade, and will back up that advice with commentary on how they have reached their conclusion. If you are an aspiring Forex angel and are looking to supplement your profits and learn as you do so, this is a good way to do it. If you trade with a purely mechanical approach, you will make money in Forex trading, but you won’t learn anything new about the market and so will effectively be “locked in” to the service – i.e. you’ll have to keep paying to get the signals. The choice is entirely down to how you want to trade now and in the future.
Finally, we recommend that you paper-trade any signals before trading them in a live account. Doing so will give you the opportunity to become comfortable with the way the system you have signed up for is actually traded, and will give you some confidence in the signals provided to you.
In conclusion, Forex signal services can play a variety of roles in your trading career – from providing you with a low-stress income (Forex signal copying), through to helping you learn to read the market and ultimately become self-sufficient as a trader.