How To Spot Scam Forex Trading Signals

There is a lot of money in the field of trading signals - this attracts many scammers that attempt to take your money with false promises and unrealistic performance. In this article you will learn several easy tips that will help you spot these scammers.

Tip #1: Check for Real Performance
Many dishonest signal providers show past performance on trades that were not executed at all. Check for the legal disclaimer at the bottom of the page and look for 'simulated trading'. If the trades that are shown are the result of a simulated trading, they are prone to manipulation and likely not to represent the actual performance of the provider. When the trades are simulated it means that they were executed by a robot that may have been optimized to produce great past results but very poor future results.
Deal only with providers that have executed their trades on real accounts. If they are reporting their trades to a 3rd party site like mt4stats.com or ForexPeaceArmy, this is even better - as it shows that the performance is true and honest. It also shows that the provider is very confident in its abilities as it is sharing them in real time.

Tip #2: Beware of High Risk, Small Reward
Many scammy signal providers attempt to create an illusion of profitability - by entering trades with high risk and small reward. Entering trades with 100 pips of stop loss and 10 pips of take profit will result in many winning trades - and several few losses which will wipe out the winnings. This trading behavior creates the illusion of profitability because the hit rate will be very high - clients are impressed by the high win rate and subscribe, only to lose their winnings and more after several trades. Demand that your provider wins at least the amount he rises. You can measure and compare its average win and average loss to calculate his risk:reward ratio. Any number above 1 is acceptable - above 2 is astonishingly good and also very rare. Be extra cautious of providers with risk:reward smaller than 1:5. This indicates a high risk provider that is almost certain to wipe out your trading account. You may also want to avoid such poor risk management in your manual trading.

Tip #3: Look for Reviews
There are several sites that allows clients to post reviews on their trading signals providers. Such are ForexPeaceArmy.com, and TradingSignalsForex.com. Before subscribing to a signal service, look for reviews of past clients. Check if the performance is honest and unbiased, make sure that the support is quick and that the alerts are functioning. This will reduce the risk of being scammed and subscribing to a losing signal service.