Forex trading is a high risk business. According to various studies, anywhere between 70% to 95% of retail Forex traders lose money. So, there is a lot to learn before you can be a successful trader.
As a Forex trader, you need to first master the strategies. You could be scalper, a day trader, a swing trader, or even an investor.
- A scalper is one who aims for very quick returns. The average time they take between opening a trade and closing it is often in minutes.
- A day trader is one who trades a few times in a day. The time they take to close a position could be a few hours; and they seldom leave positions open overnight.
- A swing trader is one who aims for handsome returns over several days, or even weeks.
- An investor is one who follows the news and aims to stay invested for months
Depending on what kind of returns you are looking for, your strategies may change. Scalping can be incredibly rewarding. But it also carries a lot of risk. Scalpers also prefer high leverage trading – sometimes upwards of 500x.
Day trading, on the other hand, can be quite rewarding as well. But you also can choose to go with lower leverages. On average, day traders go with leverages between 5x to 30x. Leverages as high as 100x is not unheard of, either.
Swing traders seldom choose to go with high leverages. They typically go with 2x to 10x leverages.
Finally, investors – the people who stay invested long term – pick unleveraged trading options. This is simply because the overnight fee (or swap fee, as they are called) can often eat into the profits long-term.
As a retail Forex trader, investing may not be a good option to go with since the returns are often miniscule if you are going to deal with unleveraged trades. Ideally, forex traders must go with leverages between 10x to 500x.
Anything less is not rewarding enough, and anything more can be incredibly risky.
How to choose a signal provider for Forex trading
If you are new to Forex trading, you may be wondering what or who a signal provider is. A signal provider is someone who analyzes the markets and sends you timely notifications on what positions to open, when to open them, and also when you close them.
Typically, signal providers may either charge you a subscription fee to offer this as a service, or may charge you a percentage of the profits they make for you.
So why do you need a signal provider? The short answer is that Forex trading is incredibly complex. It can take months, or even years, to master the one strategy that can bring you consistent returns without high drawdown (i.e. losses).
Finding a reliable signal provider is akin to finding a good wealth manager. In the right hands, they can help you grow your wealth reliably without taking undue risks.
Watch out for the Forex scammers
Before we go any further in this article, I must warn you of something – signal trading is a very lucrative profession. This means, it attracts a lot of scammers who promise you sky high returns and this obviously attracts a lot of people.
The way it works is that these scammers use a lot of risky strategies in their trade that are indiscernible to the average newcomer. And they get sucked in due to these fake promises.
Well, I wouldn’t call them fake promises either. These returns are real. If you put in your money, you will probably make those returns too. However, because these strategies carry very high risks, you could blow up your account anytime.
When I say blow up your account, it actually means that. Even if you opened a position for only $100, it is still possible for you to lose all the $1000 or more in your account. That’s how leveraged trading works.
When that happens, these scammers simply close this account and open a new one. But you, the guy who put in their life savings, will be left with nothing.
In this article, we are going to stay clear of anyone using high leveraged trading. No matter how amazing your trading strategy is, high leverages are always high risk and it can risk your account. So, we are not going there.
How we made this list of the best Forex signal providers
I get it – as a trader or investor, you want to see your money grow. A 10% return year on year is simply not worth the risks with Forex trading. You would rather put them in an S&P 500 index fund.
But at the same time, capital protection is incredibly important.
For this list, we are looking at two things – the historical returns on the trade, and the leverage used to make these trades.
So here goes my list of the best signal providers based on the assumed risks and the historical returns.
- RAFRADOR – Safe Forex Trading
Leverage used : 1:30 (Low risk)
Minimum account size: $2000
Yes, that’s us. In an industry that’s cluttered with promises of high returns, such false promises is one thing you won’t hear from us. We don’t do high return trading, simply because it also means high risk.
What we offer however is safe forex trading. We spend several months devising every trading strategy that we do, and make sure that even in the most volatile scenarios, your drawdown is less than 7.5%. We use a modest leverage of 30x on Forex derivatives, and 5x to 10x leverage on indices and commodities.
On average, we are currently seeing a growth of around 0.20% to 0.25% a day. That works out to about 4-5 percent month on month growth, and between 60-80% year on year.
But as always, there are no guarantees. Sometimes, we could have trades that drag on for several days at a stretch. During other volatile situations, we could have no ideal ‘entry points’ which means we simply protect your capital and don’t trade at all.
So by no means is any of this a guarantee. On the contrary, it is important to know that none of what we offer is financial advice. Forex trading is risky and you can and will lose money at some point.
But since we trade with our real life savings, we are going to make sure that high returns do not come at the cost of losing our homes.
- Fire GC
Leverage used: 1:100 to 1:500 (Medium to high risk)
Minimum account size: $2000
We like this signal provider for how long they have stayed in the trade. However, they do use a high risk 100x to 500x leverage on their trade that is not something I personally prefer. But what makes them a good signal provider is the fact that they have attained 589% growth in the past 3+ years of trading.
In terms of strategy, they use what is called a ‘grid trading’ system. It can be effective, but it also has its own group of naysayers and critics who call it a risky strategy. But the proof of the pudding is in the eating, and Fire GC has results to speak for themselves.
Some things to watch out for. I looked into their trade history and noticed a peak drawdown of 13.10%. However, at a daily level, they have witnessed much higher drawdowns of between 19.46% and 23.42% in the past two years.
But having said that, they have a healthy 75% success rate on their trades which is impressive.
- Trade Professor 7
Leverage used: 1:500
Minimum account size: $2000 to $4000
This Russian signal provider has seen their $1000 account grow to $12000 in the past 4 years. That is an impressive growth whatever way you look at it. But the fact that they require a leverage of 500x can make some serious investors queasy.
They claim to use a proprietary indicator blended with a counter-trend strategy to carry out their trades, and enjoy a healthy 71% win rate.
In terms of drawdown, the max they have witnessed is 20.80% although at a daily level, the account has seen drawdowns as high as 35%. So that is something you must consider when you invest in a high leverage signal like this.
- VIP Arbitrage
Leverage used: unknown
Minimum account size: $5000
While I do not know what leverage is typically advised for this signal provider, I am still listing them here because I see they have been able to enjoy typically low drawdowns with decent returns overall.
Not much is known about the exact strategy they use in their trade, but what I do know is that they deploy a bunch of different strategies, and not rely on any single one of them. That can be a good and a bad thing.
Good because it provides diversification, and bad because you may fail to see consistency in your results.
The signal provider uses a 1:1 risk reward ratio (that is, they bet the same amount of money for both taking profit and for a stop loss) which is a little unconventional since most traders like to take a higher reward relative to risk. It’s only expected then that the win rate drops in this case.
According to their trading history, VIP Arbitrage has a 55% win rate with max drawdown of 6.59%.
While they do appear to be generally safe with respect to their trading habits, one reason I won’t prefer them is because they do not have an algo trading system in place. It’s a human at the other end. This means that the trades need not always play by the rules – human emotions like anxiety and panic could contribute to inconsistent results; something that an algotrading script won’t have.
- SEA South East EA
Leverage used: 1:100 to 1:500
Minimum account size: $500 (for high risk) to $2000 (medium risk)
This is a complete algo trading system which is right up my alley since it plays by the rules and is not driven by human emotions. The reason I like this system is because of its relatively low drawdown of 3.8%.
From my understanding of the trades, they use a grid trading system that, as I mentioned earlier, is kind of controversial. However, the results do speak for themselves. The SEA South Asia system has a monthly growth rate of around 6% which is impressive.
The concerns I have about this strategy again has to do with the leverage. At a minimum leverage of 1:100, you are looking at medium risk for your assets. Also, I would highly advise against taking their high risk $500 account size option. Since it uses a strategy called Martingale to close their positions, your positions could get highly unsustainable one bad day and you may risk blowing up your account entirely.
I also say this because this system has a lot of ‘control elements’ that a buyer can use to tweak it to your preferences. But unless you are qualified to do it, you may set up the wrong parameters that could turn against you.
For example, you may choose to have multiple positions open at a time. This can work well most days when the market is rational. But one volatile day, you could have everything go up in smoke.
Wrapping up
I hope this article gave you a good glimpse into what you should be looking at while picking a signal provider for your Forex trading. Remember that historical data is not a measure of future performance. The best, and most reliable traders could blow their accounts up tomorrow. So, do not invest your life savings into signal providers, and always only invest money that you are okay to lose.
Also, do not start big. Find one safe and reliable trader. Give them a few months to build your wealth, and use the profits made from the system to invest in other signal providers. This way, you can be sure that even the worst drawdowns do not put your life in peril.
As always, safe trading!