The foreign exchange market, or ForEx, has attracted many people and many of them have made it their financial vehicle of choice. With the markets new popularity, there are certainly some extras to consider. Books, videos, software, trading systems and third party signal providers. Today, I will tell you about some things that you should consider when selecting an excellent third party signal provider.

For you to choose a quality third party signal provider, we should have a good understanding about who they are and what they do. Signal providers are other traders or analysts that are able to place trades in your own account with the hope of turning a profit. Depending on your trading needs, you can have one or many signal providers.

Like anything else, all third party signal providers are not created equal. At first glance a trader may look like a home run. That same trader may well end up completely torpedoing your entire account in one afternoon. To help make sure this doesn’t happen we’ll set down a few guidelines. These guidelines will give us something to look for when choosing our third party signal provider.

1. First, I make sure that the trader is a winner. This is a little bit obvious already but I could always see losers with 50 to 100 people trading their signals.

2. The next thing to look at is how long the trader has traded profitably. You don’t want a brand new trader without a track record trading your real money account.

3. An important factor is the maximum drawdown that a trader has caused to their account to date. Big draw downs mean a greater chance of a margin call and a much bigger chance that you will never recoup all of the losses that take place in a massive draw down.

4. The first few are fairly easy to keep an eye out for. They should all be displayed on the main screen and you may even be able to sort by each of them. Once you find several signal providers that you are considering, you should think about looking a little closer.

a. Take a look at individual trades. Are all of the trades placed in the same direction on the same currency pair? If so this trader has not yet seen a reversal.

b. Look at their draw down on individual trades. Do they let a trade go 300 pips against them and then close it out when it hits 5 pips of profit? This is a trader who lets their losses run out of control and cuts their winning trades short. It’s not a trader that you want in control of your money.

c. Do they add to losing positions? A trader who constantly adds to losing positions hoping it will turn for them is not someone you want trading your account.

5. Choose a signal provider that suits you. Some traders may provide larger returns over time, but take bigger risks leading to bigger draw downs. This might be OK with you. If you are more conservative and cannot stomach large drops in equity you probably should choose a more conservative trader.

This is only a simple guide for you to consider when looking for good third party signal provider. Remember to always trade a demo before a live account and that ultimately the money is yours and no matter what happens to it, you are the one who’s responsible for it.

To learn more about Forex Trading Signals visit Automated Forex Trading Systems.