Types of forex signals services and how you can use them
Trading can be difficult; to put it very bluntly and there is a lot of truth to the cliché that more than 90% of retail traders lose money. Let's face it, not everyone is cut out for trading. If not, then we would all be traders, making big money and sitting on yachts taking our dream holidays.
There is a reason why you take your car for a fix up to a mechanic and not to a doctor. For the very same reason, if you want to trade the financial markets, you would prefer a certified finance or an investment professional or an investment company to help you succeed than turning anywhere else.
With the recent surge in retail forex trading, thanks to the lower deposit requirements, just about anyone with a computer, internet and some money can dabble in the financial markets. Precious metals, stock CFD's, futures, currencies... you name it, you can trade just about anything you fancy.
However, not many people (traders?) are cut out for trading. But if you still feel the urge to make some additional money, then you are better off using a specialized service. It goes by different names.
Some call it an investment service; others call it a signal service. No matter the reference, the bottom line is that the services are aimed at trading with your money to make money from the markets. In this article we will explore the world of “forex signals” and the different types you will come across. Some are self service, some are full service and of course the fee you pay varies.
So if you are new on the block and looking for a forex signals service, this is where you should start. Learn about the different types of forex signals services.
Types of forex signal services
Not so long ago, traders had just two options. Either put their money in the hands of a money manager or to trade by themselves but with signals provided by an expert. Things have changed now and traders are spoilt for choice. As someone looking for a forex signals service you will come across the following categories:
- Investor services
- Signals provider
- Copy trading
Let’s explore these three types in some more detail.
The investor services type of service is the high end and is usually pricey. The minimum requirement to join such a service is also on the higher end of the scale. You can call it a fund management service or an investment house. These types of services usually require you to invest an amount for a certain period of time and provide you monthly/quarterly or annual returns on your investment (of course after deducting all the different types of fees). As the name suggests, such type of a high end service is best suited for someone who perhaps has $50,000 or somewhere in the ballpark and is in the game for the long run. Investors typically invest and hold for long periods of time. If you want to make use of such an investment service, you should pay attention to the fees, the returns, whether your principle is guaranteed and of course, account all the above for inflation. Depending on where your money is invested and the risk involved, the returns will of course vary.
A forex signals provider is an intermediate kind of service that caters more specifically to the retail traders. With a signals provider, the fees can be either a flat monthly or quarterly fee or a performance based fee, and depends on the level of service that they offer.
A typical forex signals provider would give you access to a dashboard where they publish their signals, which includes a buy or sell price, stop loss price and take profit price. As you might realize by now, with a forex signals provider you still have to do the hard part of executing the trades in a timely fashion. You will also need to manage your positions (or trading lots or contracts) to account for risk exposure.
These services are fairly affordable but the trick is in finding a forex signals provider that has been long enough and has a proven track record that shows not just the returns but also the drawdown or volatility in their trading. Some signal providers can also meet you halfway to recommend you on what trading size to trade depending on your risk profile and the amount you have to trade.
Copy trading or mirror trading is the latest fad to hit the forex or currency markets. It also goes by the name of social trading. No matter what it is called, copy trading works on the simple principle that you can copy trades from a “successful” trader. You are then charged a small fee in return for using the service. Copy trading, depending on the platform can be hands free. You simply need to set aside the amount you want to allocate and the trading size or contract size per trade.
While copy trading is huge and probably where most beginners in trading start out, it comes with its own risks.
Which type of a forex signals service should you use?
The answer to this depends on a lot of factors such as:
- The amount of money you want to invest
- The duration you want to stay invested
- The risk that you are willing to take
- The returns that you are expecting
Answering these questions and then scrutinizing the investment or signals provider in lot more detail allows you to make a more informed decision when it comes to forex signals services.