Things to check when selecting a forex signal provider:
There are a lot of scams involved with various Forex products and services. Forex signals is definitely one of them and you have to be sure that the provider you are choosing is reliable and offers you exactly what he says he does. In the post I want to single out the criteria that have to be taken into account while selecting a provider.
Do forex signals make money?
The first thing is obvious: you have to find out whether the signals make money or lose it. If you analyze a lot of free forex signal services you will find out that most of them actually lose money consistently. Your job is to find out whether the service made money at least in the last six months or better in the last twelve months.
How long have they been profitable?
Then you have to figure out how long the provider has been running his signals. If you do a research you will find out that some Forex robots that are sold for hundreds or even a thousand of dollars have only a few weeks of performance. This smells like a scam to me as you can choose the best few weeks when the robot performed best and skip those weeks and months that lost you money.
What is the biggest drawdown?
It is also essential to look at the biggest drawdown that the signal produced. If signals have sharp swings (50 percent loss of your deposit) I would not want to subscribe to such a service even if it has large profit swings. You simply cannot know when you will be completely wiped out by following such signals. You have also to find out whether larger losses come from single trades or a number of trades. Again, if a single trade causes you to lose fifteen or twenty percent of your deposit, there is something wrong with money management implementation of the provider. No good signal provider risks more than five percent of your deposit on a single trade.
Expect a trial period
Lastly, check if the company has a trial period for their signals. You do not want to trust anybody blindly in this business and can rightly expect to test whether the provider really offers what he promises or he simply exaggerates on the performance of his signals. The trial period will help you to see whether the service is reliable, even if it is as short as a single week.