Choosing a Forex Signal Provider - Red Flags By TK Kearns At Isnare.com Ezine Articles

There are some red flags that should be easy to spot that will help you to protect your forex account when you are trading third party signals. Many of the traders available as third party signal providers look good for a few weeks, or even months, but are really just ticking time bombs. You don't want to be around when the timer stops.

This article is intended to highlight a few things to look for and avoid when sorting through all of the third party signal providers out there. It is in no way intended to cover every problem that traders may or may not have. Now, what to look for:

Trading Without Stops

Any trader who trades without stops should be avoided. Even if the trader is good, there are facts that cannot be control. There is always the chance of a power outage or internet connection failure that will leave your trade unmonitored and unprotected. News can move the market fast and far and there isn't always time to get out of the way if it is unexpected or not in your favor. Trading without stop is the first thing that any trader learns not to do. Avoid this trader at all costs.

Disproportionate Win/Loss Sizes

Some traders get excited and pull profits off of the table far too early. Generally this is a much better idea when your trade is a loser. You want to cut your losses short and let your winners run. This should cause your winners to be bigger than your losers. Any trader who regularly takes 10 pips of profits and has 200 pip losers on his books is no one that you want trading your account.

New Accounts

These are not actually red flag traders but you should still avoid them. Any trader with only a few weeks worth of records should not be traded on a live account. You can absolutely run them on a demo for a month and take a look at the results, but if the trader is worth trading, they will still be there in 6 months. And by then you'll have a much better idea of who you're dealing with. Another thing to look for is whether a trader has made the same trade over and over that is the bulk of his trades. That is to say if the trader has 100 winning trades and they are all long the GBP/JPY, this trader hasn't shown you anything yet. They simply found a trend and continue to jump on and off of it.

Huge Gains After A Draw Down

Traders who have abnormally big winners at the end of a sizable draw down have usually given up and are taking one last shot. Their account recovers and to the untrained eye it looks like a solid winning trader. For every 10 traders that try this maybe 2 will survive and bounce back. This means that those 2 are floating around waiting for you. When they have their next draw down they will likely try the same "hail mary" play and the results may not be so favorable. Don't let someone trade your money on a wing and a prayer.

There are obviously many more tell tale signs that a trader should be avoided and this article is only intended to get you started.

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