These days, there is a new trend in the forex market. This is the sale and purchase of interpretations of forex charts through forex signals. The trend is mainly being driven by forex brokers who are looking to make it easier for new traders to ease themselves into the market while making profits.
Essentially, the process involves a new trader paying a monthly subscription to get another trader’s interpretation of forex charts in the form of forex signals and using these signals to profit from the market.
However, while the concept is wonderful, it can turn out to be very dangerous. Here are some reasons why you should not rely on other forex traders’ interpretations of forex charts.
They Could Be Incompetent
If a trader has enrolled into such a programme then it is highly likely that he has done so because he has been unable to make enough money from conventional forex trading.
Therefore, by this logic, it can be assumed that the majority of individuals who sell their assessment of forex charts are essentially incompetent at precisely that. Therefore, if you try to piggyback on their interpretations then you run the risk of incurring losses.
Their Strategies May Not Suit Your Personality
Another aspect which makes it dangerous for you to buy an analysis of forex charts is that different traders follow different systems and strategies. Moreover, in forex trading it is important for a trader to have a strategy which suits his personality and encapsulates his capabilities, his emotional tolerance levels, and even his financial reach. Therefore, the signals you buy may not be suitable for your personality which can also lead to losses and undue stress.
They May Be There Only To Make Money
Motivation might be a big concern as well because a trader selling his interpretation of forex charts would not really care whether they bring in profits or not. This is in direct conflict with your primary purpose i.e. to make money from the signals you receive.
Their Targets May Be Different From Yours
You should also keep in mind that different traders have different targets and financial capabilities. For instance, if the seller of forex charts’ interpretations has more money than you then he can absorb greater drawdowns than you. Therefore, the drawdowns from the signals can easily lead to a margin call being called against you.
They May Be Inclined Towards Overtrading
The majority of systems for selling forex charts’ interpretations are based on quantity i.e. the selling trader gets paid for the number of signals he sends out instead of how successful those signals really are. This kind of system usually pushes the signal providers to simply churn out as many signals as they can in as little time as is logically possible.
First of all, this need for quantity will affect the quality of the seller’s assessment of forex charts. In addition, this kind of a system has the potential to push you into overtrading in the market, which is never a good idea.