Currency Trading Signals
A currency trading signal is simply an alert to place an order in the market. Either a trader decides to trade based upon the rules of their trading strategy or a software program generates the trading signal and an order is generated and the trader has a live trade in the market. Here we will discuss the various trading signal services which you can buy and also why, generating your own trades is in most cases better than buying a signal service.
A Vital Point You Need to Keep in Mind
If you are following any trade recommendation service, you need to understand how and why it will work and know the criteria used to generate the signal and also, why it will be successful over the long term. With any trading system you will face dips in equity as trades lose for a reasonable period of time and to stay with the service you are following, you need to have confidence in it to trade it - traders simply can't follow systems through losing periods without this knowledge. You need to know and study the logic and if a vendor is not going to tell you the logic then, don't even consider the service.
Buying FOREX Software Signal Services
You can buy trade recommendation services which can be delivered in a number of what with two of the most popular being text and email trading alerts and also, get automated software which will generate trades automatically and these are known as currency trading robots or Expert Advisor's. Over the years, I have seen hundreds of these services and almost all of them are scams. There just trying to make money from new traders and appeal to their greed offering huge profits, with hardly a losing trade and I have even seen one which had no losing trades. If you want to lose money buy one. You can find more about how to spot Currency Trading Robot scams on this site and now let's take a look at another losing type of signal service.
Broker Trading Signals
Why are recommended signals from brokers a bad idea? Well as they make money when you lose a lot of the time, they have a conflict of interest and also, these recommendations just reflect a currency pairs likely direction from news stories and they lose. Also always keep in mind, if brokers could really make money from trading,they wouldn't be brokers - they would be fund managers, avoid broker signal services.
Social Trading Networks and Copy Trading
The concept of copy trading is - to see how other people are doing with their trading strategies and copy the best traders on the network - sounds like a good idea? It's a good idea if you want to lose your trading account quickly in my view and here's why:
The social networks online scroll how traders have made online ( the best ones) and the time frames are normally pretty short like how much they have made in a week, month or even 3 months on the brokers trading platform but this means nothing. Any trader can be lucky and double his account and make money short term but any traders track record, needs to be judged over 1 - 3 years.
FOREX brokers love the concept of social trading and this is simply because it makes them a lot of money, in attracting trading deposits and also increase trade income from pip spreads. They know most traders are greedy and want to make extra money and not get a trading education so this is a great way to appeal to greed. FX brokers also know, the majority of traders will switch between traders and follow the trader, with the best short term track record and this chopping and changing also helps these traders lose.
There is no successful FOREX trader, who would share his trades for free on a FOREX social network site and while copy trading is one of the fast growing areas of online trading, it remains a great way to lose money. Brokers see this as an honest service but in my view, it's a scam. Copy trading, tempts people to trade FOREX markets with no experience, gives them unrealistic expectations of what they can make trading and appeals to greed and naĢvety - avoid copy trading signals at all costs.
What Makes a Good Trading Signal?
If you are buying a signal service or want to develop your own then here are some points you should consider, before using them in your trading strategy:
As we said earlier one of the keys to following any mechanical system or strategy is to understand how it works and why it will work money. You need to have confidence to follow ANY FX strategy with discipline.
Other ways to see if a the trades generated by specific rules will work is to remember this check list.
The generation of the trade should be made by just a few inputs so its simple and robust. As a general rule the more rules that generate the signal the less chance it will make money in the market.
The rules for generating the trade should be the same for all currency pairs and there should be no special rules for individual pairs. If you see a service that does this, chances are its been tweaked to show a profitable performance on back data so its curve fitted and will lose money.
The exit rule is just as important as the entry rule and most automated trading programs I have seen for sale have terrible exit rules. Money management rules are so poor because the system has been curve fitted on past data and the only way the programmer, can make it show a profit is - to use loose money management parameters and this will work in hindsight but in real time trading, the system will lose money quickly.
Any successful trading strategy is based on specific entry and exit rules and this allows a systematic and disciplined approach to trading which with the right rule based program, can make big profits. My own view is most of the commercially sold trading systems are junk and should not be considered.
If you do find a commercially available service which is good, let me know about it because I Haven't seen one in around 30 years of trading. If you want the best currency trading signal service which works which you can have confidence in, you should devise your own. If you want to do this, you will find plenty of education on this site to show you how and you can get a Free Currency Trading System to catch all the big profits from the big trends.