The Lowdown on Futures Signals Services

Futures trading probably isn't the trading option for novice traders, but it is a great asset class to aspire to. Many traders that have found success with stocks or options later step up to futures because the leverage used in futures trading gives traders the opportunity to make larger profits in a shorter amount of time.

Given that futures trading can be a vexing game even for seasoned traders, we like the idea of using a signal service as part of a comprehensive futures trading strategy. For those new to futures trading, a signal service can be a great way to understand the various futures markets and what goes into finding a winning futures trade.

So without further ado, let's take a look at some of the traits you should be on the watch for when evaluating futures signal services.

Pick Your Market, Pick Your Service

One aspect of futures trading that we've frequently highlighted is the wide array of securities that have accompanying futures products.
Certainly, we love the fact that the futures market has something for everyone, but this gift can also be a burden to new traders and it can definitely be a burden when shopping for a signal service.

Traders can become overwhelmed by trying to focus on too many futures products at once. Once you've nailed down which futures markets you want to focus on (Remember to limit the total to two or three when you first start out), you can start to focus on what signal service is right for you. This is the easy part. If you like to trade index futures like the Dow, Nasdaq and S&P 500, make sure your signal service is proficient in this area of futures trading.

The point here is that just as a trader can spread himself too thin by watching too many stocks, currency pairs or futures products, any signal service can suffer from the same problem if it's trying to catch winners all over the place. Futures signal services with laser-like focus are the way to go.

How Does Your Signal Service Find The Winners?

Every signal service has a different method for finding and recommending trades. Some are fully automated and will just place trades for you. Others tell you what the trade is and give you, the trader, the option of taking the trade or passing on it. The differences don't end there because every signal service uses different indicators. Some search for overbought and oversold conditions in the market to find the best trades. Others use volume and momentum indicators, while some signal services attempt to put traders on the right side of a strong trend. Still other signal services look for trend reversals and suggest trades that are counter to the most recent obvious market move.

It seems obvious, but a lot of traders only hear the part about the signal service finding the trades and assume all the work is going to be done on their behalf. If only things were that easy. While no successful futures trader would pass on a signal service that has consistently delivered stellar results, that same trader also wouldn't pass on learning everything he can about the system's inner workings and methodology. The long and the short of it is you should know why a signal service picks the trades that it does before using real money with that system.

Demo Accounts/Simulated Futures Trading

Want to get a sense for how a signal service will perform without risking your hard-earned dough? There's a solution and you should definitely take advantage of it. Most reputable futures brokers offer free demo or simulated accounts where you can test the efficacy of your signal service without putting real money on the line. If you like what you see in the demo account, then give your signal service a whirl on a live account.

Trust, But Verify

As we always say about any of the signal services we discuss, make sure you take the time to go over the service's past trades. This is your opportunity to play trade detective and verify beyond a shadow of a doubt if all those winners the service boasts of could have really taken place.

Make a checklist of factors that are important to you. What are the amounts of the biggest winners and losers the service has had recently? Does it perform well in a variety of market conditions? Is the system too conservative or too risk-indulgent? These are just a few of the factors you need to verify before getting involved with a futures signal service. Trust us, you'll be glad you took the time to do your homework.