Understanding Forex Signal Results

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Results being measured.Forex Signal results are the number one deciding criteria a trader considers when evaluating Forex services.

We can accept some losing trades, but what is the point of paying for signals if you don’t make a profit?

Every signal service seems to tout positive results on the results page.

So how do you determine if the results you’re looking at are actually positive?

Know the facts.

Fact 1: Real time history.

First and most important you must be able to verify that the Forex Signal results reflect real time activity signaled to active clients rather than a signal program being applied to the past.

You will want to look at a reasonable period of time to get a good feeling of positive results. Look through several recent months and months in past years.

An increasingly popular form of real-time trading history are the uncensored results audited by 3rd party companies such as MyFXBook.

Fact 2: All Forex Signal results are “hypothetical.

Signal providers are required by law to say that results are hypothetical because you as an individual trader cannot expect to achieve 100% the exact same results as the signal provider.

Why not?

Well, you may experience slippage on your Entry or Exit point. Actually, you may not even get offered the same Entry Point rate from your Forex broker.

Or, your brokers rates may spike and activate your Stop or Limit and yet another brokers rates don’t experience the exact same spike, and so it is almost impossible to expect identical results each time.

Fundamentally, if you follow the signals exactly and if your broker honors the prices given to you by the signal provider, your results should be similar or exactly the same as those advertised by your signal provider.

Fact 3: Take Profit is the main variable.

Most traders will follow the advice of a signal when it comes to Entry Point and Stop Loss, but when it comes to Exit Points; most traders have their own take profit goals.

Example

Results may show a maximum possible, or best, move of +94 pips.

  • Trader 1 uses one lot and exits at +50 banking a total of +50 on this positive trade.
  • Trader 2 uses three lots: The first lot exits at +35, the second lot exits at +60, and the third lot exits at +80 (or he trade one lot and partially closed the trade at each respective target). Trader 2 banks +177 pips on the same trade.
  • Trader 3 had a Take Profit goal of 99 pips, but the maximum the trade reached was 94 pips. The trade turned around and went the wrong way and eventually activated the Stop Loss.

Fact 4: Losing trades are as reliable as the Sun will rise.

If you do not see losing results Forex Signal results; you know that what you’re looking at is pure garbage. If the results you are looking at show winners and losers it is more likely that you’re looking at more likely legitimate real time results.

This brings up the all important risk management conversation that has already been discussed in its own article. A trader’s own individual risk appetite must be addressed when considering Forex signal results.

Make sure that your risk management approach is in line with the results in the trade by trade history. Risk management cannot be emphasized enough.

Fact 5: Percentages of winning trades is useless information.

Companies that want your business may provide you with information asserting an average 80%-90% winning trade history. However, this information serves as little more than a distraction because these percentages do not necessarily translate into favorable results.

I would consider such claims to be questionable advertising at best and outright falsehoods at the other end of that spectrum. This shiny marketing ploy is usually achieved by “creative auditing” that counts any small gain as a winner even though it is unlikely a trader using the signal would exit at that level.

Consider this:

  • Scenario 1: You receive 10 signals during the week of trading from the 80%-90% guaranteed provider. All signals have a Stop Loss of 30 pips and an Exit Point target of +35 pips exit. Two trades stop out (-60) next five trades exit at +5 and three trades reach Exit Point of +35 (+105). Your final result is +70 for the week. The signal provider books another week of 80% winning trades.
  • Scenario 2: You receive 10 signals during the same week of trading. All have a Stop Loss of 30 pips and an Exit Point target of +60 pips. Four trades are stopped out (-120 pips). Two are break evens (stopped out at Entry Point). Four reach the exit of +60 (+240). This scenario is 40% winning trades, but it ended up +120 pips positive result for the week. No creative auditing involved.

Realistically, over a long period of time, the percentages of winning trades produced by any signal provider will go up and down. During periods of strong market trend it is not so difficult to produce accurate signals at high percentages.

But what about range bound periods or chaotic periods such as those of late 2008 and through 2009, and again most of 2015. During these periods, 30% or 40% ratio is more realistic.

Now that you know.

When considering a Signal Provider make sure you look at the big picture and make sure that the Forex Signal results are real. Avoid any service that employs useless information such as unreasonable winning percentages, creative auditing and sensational claims. We invite you to hold a yardstick up to our Entry and Exit point trading results, and try us out today.

 

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