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Signal Providers
2. How to choose your signal provider? Choosing the signal provider you wish to work with is a very difficult task. Using a bad or dishonest signal provider is very risky and can blow out your trading account. Around 90-95% of signal provider are either bad signal providers, or scams, or re-sellers, or dishonest. Many persons think they came up with a good system. They curve fit their system to work with previous years, yet they present the results as back testing, yet they are curve fitted. When they try to apply the signals in the present time, the signals work for a small period and then the system fails. Other signal providers are just signal re-sellers. They subscribe themselves to another signal provider. After they receive his signals, they forward them to other traders, who are subscribed to them. Such a process would cost this re-seller a $100 to buy a signal. He resells the signals for $50 to 30 traders. He makes $1500 USD. Economically, this is cheaper for a trader. However, this is illegal. And, the trader never gets the required support. In this article I will help you to choose a signal provider, if you still insist on using one. First of all you should know what you are looking for.
There are mainly two types of signal providers. The first on is the set and forget. This type sends signals at a pre-set time of day. The signal includes the entry point, stop loss and take profit levels. This signal remains valid, until end of day, or until one of the levels are hit, provided entry point was taken. The other type is the keep updated. This type of signal provider can send you the signal at any time of day. He can change the entry points, stop loss levels, and take profit levels at any time of day too. You should take care when choosing your provider. Working with the first type is easy. However, working with the second type is more difficult, and requires that you have an internet connection and a computer on hand, any time of day. You should also check when does this signal provider usually send his signals. As you could be living in California, and your provider could be in Bulgaria. So expect to get up at 3:00 o'clock in the morning to check your email, or your SMS, so that you do not miss your signals.
Never believe in back tests. Even if they are true, you should never believe in them. Back tests are usually curve fitted. A system creator, will fine tune his system, back test it, re-tune, back test, and retune until he gets the optimum results for back test period. This is called curve fitting. Optimized results for back tests do not guarantee any good results in the future. A good system is a system which is tested in forward mode. Forward testing cannot be optimized, nor can be tweaked or tuned. The only way to know that the results presented in the website of the signal provider are forward tested is by due diligence. Use WHO IS services to know when did the signal provider create his website. See the date of the oldest result on his website and compare. I have seen signal provider websites, created on January 2007, and he has successful results from 2003!!!! How can you believe such a guy!
Many signal providers send you signals which you cannot fill. They tell you for example to buy EURUSD at 1.3520, and when you try to buy it, you see the price 13550! Any signal sent, should give the trader ample time to enter the market.
Never work with a signal provider who does not attach stop losses to his signals. Those guys are worse than gamblers, they gamble with your money.
You should always look for a forum, a 3rd party one, which has a thread or discussion about that signal provider. Read what people talk about him. Read their experiences.
Check sites which provide reviews about them.
Checkout sites like collective2 and fx-auto who provide live tests for those signal providers. Compare their results with the results provided by the signal provider on his website. |
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