Forex Trading Review: Dangers Of Using Forex Signals

Investors trading foreign currency have the option of subscribing to a signaling service provider so that they can receive signals when there are good opportunities to trade. Though the signals are meant to provide as accurate information as possible, this will not always be the case. It is a good idea to trust your own trading strategies and avoid overreliance on the signaling services due to the following reasons:-

1.      One aim of the signals is to tell the investors when it is the right time to enter a trade. When this happens then by bad luck the communication link between the signal provider and the investor’s breaks, the investor will not know when to exit the trade unless they had a very good backup plan. When such a breakdown in communication happens, the investor risks losing a lot of money due to lack of a proper exit strategy.

2.      The success of using the trading signals largely depends on their accuracy to make correct predictions. This implies that the signal provider should have a valid and tested source for acquiring and sending the signals. However most of the signal providing companies aggregate data from several other sources without having any proven track record. Therefore there is a huge likelihood that the predictions given by signals will not be accurate in most of the times.

3.      The accuracy of the signals also depends on how timely the price information is. A signaling company may use a different source other than the one used by the client to obtain the price quotes. When two different sources are used in this manner, there is a possibility of a significant difference existing between the two sources and this can lead to wrong forecasting and consequently losses by the investor.

4.      Forex signal provider do not require any license in order to provide the signals to the investor so long as they will use a software and a website for sending out the signals. The implication of this is that there is no oversight and this gives room to fraudulent people whose main aim is to target desperate investors who need to the signals to make profits.

This forex trading review on signals is not meant to demonize the signaling companies in any way. If anything, there are a number of reputable companies that have been able to offer very accurate price predictions and are generally loved by many investors. This is just to act as a word of caution to those who might be tempted to rely on the signals for trading. The signals have their inherent dangers hence require a lot of caution to use accurately.