Choosing A Forex Signal Provider – Red Flags
Red flags hover about that you should be able to spot rather easily that can assist you in protecting your forex account. Traders normally come equipped with third party signal providers, some only stay that way for a couple of months, or even worse, weeks. The truth then comes to the forefront that they are really ticking time bombs ready to go off at the least opportune moment.
This treatise is not intended to be an all encompassing answer to the traders problems, it is only a tool to give you a few tips on what to look for and what to avoid. First things to look for:
Trading Without Stops
Avoid any and all traders without stops. The trader may look fine but there are uncontrollable factors that are lurking that you cannot avoid. Factors such as power outages or connection failures can effect you because the market runs fast and far on incoming news. You must avoid this type of trader like the plague. It is the first pitfall that a trader learns to steer clear of.
Win Sizes Out of Proportion to Losses
Sometimes it is a good tactic to pull profits off the table at a time that seems extraordinarily early. This tactic works well for a trade loser. It cuts your losses allowing your winnings to bolt, thus resulting in more wins than losses. A mighty good thing. But beware of the trader who takes 10 profit gains and has 200 losses on his accounting sheet. This is not the trader for you.
New Guys on the Block
These are not actually red flag traders but you should still avoid them. Any trader with only a few weeks worth of records should not be traded on a live account. You can absolutely run them on a demo for a month and take a look at the results, but if the trader is worth trading, they will still be there in 6 months. And by then you’ll have a much better idea of who you’re dealing with.
Huge Gains After A Draw Down
Abnormally big winners are the sign of a trader who has seen the end of an enormous draw down and is betting it all on one last ditch effort. The account indeed recovers and to the new onlooker’s eye, the guy looks like a true winning trader. The reality is for every 10 tries, the trader is lucky if even 2 make it to survival and recovery. These are the 2 that are wafting about in cyberspace searching for you. At their next draw down, they will almost certainly go for the “hail Mary” pass and the end could be ugly. Better not to pray your way into a winning situation, stick to more scientific methods.
That wraps up this article. As stated earlier, this treatise is only a glimpse of the evils that can befall the unwary forex explorer.
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