Online Forex Trading - Should You Use a Signal Service?

By Barry Hines

When it comes to trading the foreign currency market, there are almost as many ideas and systems out there as there are traders! Whether you are just beginning to trade forex, or have some experience under your belt, the choices to make, and the direction to take can be an overwhelming decision.

There are mechanical systems, discretionary systems, "black box" computer programs, signal services, mentorship programs, and combinations of all of these that the trader can choose from.

One choice that may be a good one for you, especially if you have not had success trading forex up to this point, or are just beginning your foreign currency trading career, is to subscribe to a reliable forex signal service.

A signal service is just what its name implies; a service where buy and sell signals are sent to you via email, sms on your cell phone, or possibly by telephone (not used much any more). Usually you will have a very short time to act on the information, and will need to be close to your trading station, or have mobile trading capabilities to take advantage of the signals.

Before you go out and spend your hard-earned money on one of these services, make sure you find out the answers to these basic questions while doing your due diligence.

1. If the signals are provided by a professional trader's analysis of the market, and not computer generated, then you will want to ask who the trader is, and what are his credentials? How long has he been trading? What's his track record? Can you get a copy of his last few months signals and the success rate?

2. Is there a trial period, such as 30 days, to trade the signals and see if they are reliable? Of course this doesn't mean they are 100% winners. That will never happen. But do the wins outnumber the losses, and do they show a net gain over time?

3. What has been the drawdown on accounts traded with these signals? Most people cannot emotionally handle even a winning system, if the account takes wild swings up and down.

This information should be the minimum you find out before subscribing to any forex signal service. Of course your long-term goal should be continued education and trading experience so you will one day be able to generate your own reliable buy and sell signals.