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The Dilemma of Relying on Trading Signals

It’s ironic that, as I begin to write this article, the last email that I received just now is letting me know that the latest forex signals have been posted for the U.S. Prelim GDP. The reason that is ironic is the fact that this article will attempt to determine what place that the paid trading signals industry has in good forex trading.

Upon looking around the internet, I find that there are many services that claim some very impressive results with their signals. Why, I saw one that claimed a 99% success rate since October of 2007.

The intention of this article is not to backtest all of the major signal providers and give you a yay or nay on each one. Of course, one has to wonder, if a provider is able to consistently provide winning signals 99% of the time, why would he bother creating a website and trying to sell the service, when he can obviously make a significantly unlimited amount of money by simply trading his own signals. Why bother with this other business? Just wondering.

Certainly, signals have their place. In fact, many traders won’t know where to begin without having such signals available to this. But this can potentially be part of the reason why we don’t have more legitimately competent traders out there.

Let’s Go Fishing.
We’ve all heard the proverb, “Give the man a fish, feed him for a day. Teach him how to fish, feed him for a lifetime.” Basically, the lesson behind this wise saying is that it is far more beneficial for one to learn a skill than to simply receive a temporary handout.

Admittedly, many of us would be somewhat lost without signals and we feel we need them almost as much as forex brokers. And it certainly is a security blanket of sorts to have someone that we trust guide us by the hand… what to trade, what stops to set, and so on. And yes, while one is starting out, this may result in more wins than would have normally been encountered otherwise.

But how do you BECOME that expert trader that people want to follow? You certainly don’t do it by trading strictly on another’s’ signals. After all, if the trades don’t originate from your own application of experience and knowledge, but from someone else’s, then how will you ever truly acquire the skills you need to be competent?

By simply receive specific directions on what to do, when to do it, etc., you may make better trades… but you won’t know why. You won’t know how the decision to trade or not was made, how the stops were chosen, and how the charts played out, and so on and so forth. The fact is, you’ll never learn anything about how to trade… you’ll just, well, trade.

Let’s put it this way… when you get a signal, how do you know if it’s a good signal or not? Everyone makes mistakes, and one mistake can be extremely costly to your balance. How can you protect yourself if you have no idea what is going on? What will you do if the signal provider you use goes down or out of business? What if you have conflicting signals from two separate providers? Or what if you simply wanted to venture out on your own to improve your skills? After all, simply playing Simon Says with your signal provider may get a little old after a while.

It is very important that signal providers keep their proper place in your trading approach. Use signals to confirm your own trade findings. If you take the time to learn about how the signals were figured out, you’ll learn how to truly trade. Only then will you be self-sufficient and in control of your future financial destiny.