Live Forex Signals: What Subscribers Must Know First
Live Forex Signals offered on verified, independent third-party markets that enable traders to copy trades of professional traders and smaller funds are certainly not a scam. However, it is important to examine a few things before getting involved. Here are four things to look for before subscribing to any live FX signal.
What is a drawdown? It's simply a decline in an investment fund that is from peak to trough, highest point to lowest point. No investment goes straight up or down, it just does not work that way. There will be high points and low points along the way whether the investment is headed south, north or just east (sideways). The drawdown focuses on the downside risk that is involved.
Drawdowns tend to scare a lot of traders and investors. Many traders and investors think that they can handle risk and then they go nuts when a drawdown takes place in their account. One bad day or week is enough to scare some in the market, make them want to sell everything, curse out their Financial Advisor, claim that the market is rigged, and curl up in the corner of their bathtub.
There are three measures of drawdowns:
- Absolute drawdown: This is the difference between the initial deposit and the lowest point below the initial deposit.
- Relative drawdown: This is the highest percentage drop in equity experienced.
- Maximum drawdown: This is the maximum top-to-bottom decline in the value of a position or portfolio.
Relative drawdown is what is often used as the measuring stick since almost all participants in Live Forex Signals get involved well after the initial deposit and even the first few withdrawals made the provider. There's nothing wrong the provider taking their profits off the table, they are just like you, they want to use the money for practical and impractical pursuits.
The percentage relative drawdown from the overall balance should be less than 30%. When Live Forex Signals are placed in a portfolio prepared by Freevestor, the risks go down significantly.
2. Average Holding Time
If the average holding time is less than ten minutes, it is a reason to be wary and it is not exactly for the reasons you may think.
You may think scalping is risky and that high volume transactors are reckless, but there are plenty of scalpers who do very well. There are also plenty engaged in various forms of arbitrage, they get in and out of positions very quickly. The nature of scalping is not the issue at hand.
The issue actually is the difference between the rates their broker provides and your broker provides. Rates are typically similar, but the spreads and rates differ every nanosecond. These differences could make the difference between their profit/loss and your profit/loss, which makes it very difficult to gauge the success of your signal provider's trades. A longer holding time and larger profit/loss taking horizon allows for these differences to be smoothed out easier, which means that the returns should line up.
This is why there are latency arbitrageurs in the market, they are taking advantage of these differences. They are not executing it manually, they are executing it on an automated basis.
3. Live Forex Signals Providers Employing Grid and Martingale Strategies
These are lazy and gimmicky trading methods, which leave traders on a path to ruin. The trading history will give it away as far as whether a Live Forex Signals provider is engaging in this.
Grid trading simply entails the creation a buy/sell grid at predetermined rates within the same amount from each other. The problem is that a buy or sell order that does not reach its Take Profit point can result in a large open order loss and potential margin call despite hitting Take Profits on the way up or down from the triggered order point on the grid. All it takes is one open entry that fails to reach its Take Profit to take a significant blow to your profitability.
Martingale trading is the act of using a Martingale Strategy and applying it to your lot sizes to make up for losses. It's a mean-reversion approach of doubling up the amount of lots to chase after a profitable positions to make up for a past loss or consecutive loss streak. Of course, traders could lose significant capital using this approach and eventually run out of money to make up for the losses incurred.
4. Trades per Week and Regularity of Trading
You are paying for a subscription to a Live Forex Signals provider. What if the provider only ends up trading once in a month or is inactive, it is cash in the trash. Inconsistent trading activity should be a red flag. It's one thing to have a slow week (Christmas Week and August Holiday), but it is another to be derelict in trading for a month. Check that trading history.
The opposite scenario also may be bothersome. What about the trader who overtrades? Once again, the scalper with the tight Stop Loss and Take Profit points creates a problem and it may result in bigger than expected losses due to negative slippage. It could also lead to inconsistent/deceiving results on the positive end due to positive slippage.
Freevestor can help you find the right Live Signals that fit your needs and present them to you in a portfolio with explanations and justifications for their selection in a customized report made just for you. The best part is that it is FREE for those who sign up with Freevestor's preferred brokers and have a qualifying deposit amount. Get started on this process.