“I have tried to subscribed before to some trading Signals especially in margin trading signals. The risk is still there, and I don’t think joining on those kind of paid or non paid trading signals has no good effects on you. As long you are learning or validating their signals or chart provided, that is okay, additional learning. But when totally copy their trades or buy/sell on what they told without validating or learning is not so okay for me.”
-BitcoinTalk User, Great Arkansas
Trading signal is a term used to describe the collection of speculations, analysis and research conducted by professional and experienced traders based on technical and fundamental factors to ascertain whether a bid (trade) can be placed. Some of the best trading signals actually help the trader make profit but it takes effort to find them.
There are different signal providers who work specifically to help traders know the exact time to buy or close their trading positions. Signals help you stay at the top of the market. These are indicators that aid the success of a trade by reducing the risk associated with it.
It is basically an alert system that keeps traders up-to-date with respect to the fluctuations in the market. It features the provision of reproducible data on the correct timings, when assets should be purchases or sold in order to make profit. Signals are electronically transferred data that a trader can opt for to receive as email on their devices.
As already mentioned, there are several sites that render market signal services, but most of these are suspicious because people who actually know when the market is likely to move in certain direction takes advantage of that information to keep ahead in the game of trading. They wouldn’t necessarily be interested in trading or sharing it for profit. This is why it is important to use proven and reliable trading signal to trade.
Risks in Trading Signals
Scam Signal Sites
The first major limitation of trading signals is the fact that there are too many scams associated with it. Trading signals are supposed to be given by professional traders and market analysts. But often, it is difficult to always verify the authenticity of the signal you receive. Using such trading signals portends risk. Could you imagine who is actually making money from a so-called premium signal charging each member $200 a month?
The provider of course…
It is important to understand that in every industry, scams come in various ways. Even though we do not discountenance the existence of real signal services, it is important to distinguish the good from the bad.
Stunted Trading Skills
Signal is good in difficult markets such as penny stocks and highly volatile markets such as cryptocurrency. However, it is important that every trader develops their own trading strategies and skills to be able to make informed decisions concerning the market. This is especially so because there are limits to what a trader that has not learnt how to trade independent of others can accomplish.
As long as a trader is fixated in following trading signals, they will never get to a point of being an expert trader because they will always be dependent on the signals to make trade. Signal service’s prediction can be wrong and this could lead to great losses.
It Makes Traders Ignorant
Trading signals are not without their own limitations and disadvantages. Focusing on signal services will make you lack experience as a trader. The best thing to do is to learn your own unique and customized way of trading without having to rely solely on signals. In order to achieve this, traders need to develop competent skills that will position them to trade autonomously.
At this point, a signal should be used to confirm what the trader already believes is the right position to take in trade. Good traders use all the help they can get to win in every trade. So whether it be a trading bot or signal, developing your own strategy is a no-brainer. This is why getting this software is not enough if the trader hasn’t learnt how to trade.
Relying solely on trading signals makes you a lazy trader. Once you become acclimatized to following signals, you will not be taking full responsibility for your actions. One of the key attributes of a good trader is taking full responsibility for the outcome of their decisions whether it goes well or not.
Following signals deprives you of the opportunity of learning from your previous mistakes and becoming a better trader. Instead of blindly following anonymous signal services with unverified track records, it is better to pay the price of education and not being totally dependent on the signals.
Poor Risk Management Sense
A good trader is not one who is just concerned about finding good entry points in the market. A good trader is one who understands the power of taking risks and doing so confidently. As a matter of fact, investment experts believe that risk management is as important as finding a good entry or exit point in the market.
What many new traders do is that they resort to trading signals after making losses in trader without knowing how reliable those signals are. This amplifies the risk involved in trading because it takes good risk management skills and confidence to make successful trades.
Traders who cannot leverage on the principles of basic risk management will not experience the full benefits of potential profitable trading strategies. Professionalism in trading involves control of emotion and sensible risk management that teaches the trader the fraction of funds to invest and the entry and exit points.
Reliable Signals Don’t Come Cheap
The fact we have to face is that there are some very good signals out there that you can use to make successful trades, but these are quite expensive. What’s the use of paying for a service that your profit doesn’t effectively cover? Such services are for investors with huge capitals.
This setback is the reason why many traders go for free signals but these are not really free since some of the best free trading signals are generated by experts paid by exchanges. Aside these, free signals are not recommendable.
More To Trade Than Signals
From the foregoing, we have established that trading is not just about signals. In addition to risk management, other factors such as knowing exactly what to do when you are trading, managing and maintaining your position, having the capacity to cut your position and adapt to sudden changes affect the whole trading process. If all you know is just trading signal, the tendency of you making a significant trading profit will be slim.
When Signal is Disrupted
This is one of the major risks in using trading signals. In cases where the signal provider stops their service or undergoes a restructuring process the trader has to start back from ground zero. If you are truly passionate about building a professional trading career, focus on building your own knowledge-based strategy instead of depending wholly on signal providers.
Participating in Pump and Dumps
Random trading signals could be used for pump and dump schemes. Owners of assets that have little or no utility could employ the services of unreliable trading signal services to hype coins or other assets causing unrealistically high demand. The initiators then dump their own coins leaving the investors with worthless coins.
This scheme could also be employed in making people buy premium signals that are not worth it. The consequence is two-fold – losing your money and losing your trade.
Are There Signals You Can Use?
Using trading signal is not a totally bad idea but the issue is that it is very risky and can have a detrimental effect on your investment in the long run. You need to take out time and tentatively understand how trading works so that when you receive such signals, you would make sense off them. This will position you to be able to make trading decisions accurately. You will get to check whether the signal is correct.
What I have discovered is that the best trading signals could come from good exchanges. These have nothing to gain by misleading their investors since their interest is in having trading activities on their platforms. You can check the exchange I use here.