Red Flags To Look For Prior To Choosing A Forex Signal Provider
Nov 25, 2009 currency trading
There are some red flags that should be easy to spot that will help you to protect your forex account. Many of the traders available as third party signal providers look good for a few weeks, or even months, but are really just ticking time bombs. Don’t be around when the timer stops.
This article is intended to highlight a few things to look for and avoid. It is in no way intended to cover every problem that traders may or may not have. Now, what to look for:
Stopless Trading
Even the best trader cannot control all facets of a trade, so the ones without stops must not be on your active list. Power outages and connection disconnects are always possible, no matter how smooth everything else looks. Since you are dealing with immediacy here, news can take the market on a swift and lengthy journey. The last trader you want working with you is the one without stops. This is the first trader to avoid.
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
New traders will not per se raise a red flag. They should be circumvented, however, because of a lack of track record. You should not trade with anyone until you can track a decent history, of say, six months to see if he is a survivor, and by then, you will have a decent amount of history to analyze. Wait. Do your homework.
Big Winnings Following a Draw Down
Traders who have abnormally big winners at the end of a sizable draw down have usually given up and are taking one last shot. Their account recovers and to the untrained eye it looks like a solid winning trader. For every 10 traders that try this maybe 2 will survive and bounce back. This means that those 2 are floating around waiting for you. When they have their next draw down they will likely try the same “hail mary” play and the results may not be so favorable. Don’t let someone trade your money on a wing and a prayer.
There are obviously many more tell tale signs that a trader should be avoided and this article is only intended to get you started.
To learn more about Automated Forex Trading visit Automated Forex Trading Systems.
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