What are Trading Signals, and How Can You Use One?

Trading signals are ideas sent out by professional traders that give their viewpoint on market direction. These positions are then followed by beginner or amateur traders who aim to make the same profits as pros. Depending on the experience of the provider, the signals can differ in terms of performance and style. 

Trading signals are a great way to help those traders who are going through their learning curve. It helps them to remain at a profitable or a breakeven stage at a time when they are supposed to lose miserably. Our article will discuss the various forms and features of the signals and discuss how you can choose the best one.

Various Forms of Trading Signals

There are multiple ways in which trading signals are handed out to traders. Some of them are listed as follows:

• Social Media Apps. Social media apps such as Telegram is commonly used as a means to attract new traders. Most of the channels are free and are used to funnel the paid model of the signals. This form of copy trading can be hard as it requires traders to be physically present whenever the trades are sent. Investors have to set the appropriate stop loss and take profit that matches the sender. Risk management is at the sole discretion of the receiver.
• Remote copy trading. Traders are able to receive the trades remotely from one computer to another with full automation. Trades copiers are used to achieve this feat. It eliminates most of the manual hassles of signal services.
• Account management. Account management services have a slight relation with trading signals. Traders send over their portfolio credentials to the provider with the designated service, who then copies his trades using a trade copier.

Choosing the Best Trading Signal

There are tons of signal providers out there. It is sad to note that most services are only looking to scam traders by selling the get rich quick scheme. 

Verified records

Trading records that are tracked through verified performance tracking websites is the only way to prove that the system works. Most of the signal providers only choose to share their results through text messages on the channels. While some of them might be true, a majority are manipulated to get subscribers and rob them of their hard-earned cash.

Reputation

The best signal providers have a notable reputation on review forums. They are transparent about their experiences and whereabouts. Traders with a notable financial outlook may be hard to find, but you are in for a treat once you do.

Drawdown 

Drawdown is the risk that your account may incur while following the signals. Notice that the ratio between drawdown and monthly gain is 1:1 or at least more. This means that your account will grow better without a significant limit to the downside.

Strategy

The trading strategy is the point to note as it is pretty difficult to follow systems that follow a scalping approach. There can be many slippages that will result in delayed execution and difference in your and provider’s output. Swing trades are easy to follow and carry out as they have a big stop loss and take profit where price slippage does not matter. The time the provider sends out the trades should match your schedule.

Advantages and Disadvantages of Trading Signals

The benefits of trading signals are summed up as follows:

• • Novice traders. AS mentioned before, beginners and amateurs can use signals early in their trading careers to avoid significant losses. They can prevent the 90/90/90 dilemma, which states that 90% of traders lose 90% of their cash in the first 90 days of trading.
  • Mentors. Trading mentors can use remote copy trading or Telegram channels to teach other traders about their analysis.
  • Passive income. Copying signals through automated channels can prove to be a good source of side income for traders. 

• Work. Traders do not have to put in the manual efforts of analyzing the markets. The psychological aspect is also maintained through the set and forget approach in trades.

While a few disadvantages can be stated as follows:

• Latency. There is an undesirable amount of latency and slippage which can occur while copying trades manually. This can result in low profits and high losses if the market moves in an unfavorable direction.
• Scams. Fraudsters run most of the signal services that are available on Telegram. They lure beginner traders through their tactics and rob them of their money.