Receive suggestions for trades, implement them and generate profits - sounds too good to be true? Trading signal providers promise exactly that! We have analyzed for you when, where and under what circumstances such recommendations can be worthwhile.
The most important in a nutshell
- A trading signal is basically any type of information from which trading decisions can be derived
- In practice, this refers to tips and suggestions that you receive from a service provider (usually for a fee) or other people or groups
- Even reputable trading signals are no guarantee of success. However, in combination with your personal knowledge, you can achieve a positive return
- Finding the right provider is time-consuming; it has to suit you and your goals. There are no "super signals" with outstanding returns
What are trading signals?
Whether Swing Trading, Day trading with sharesoptions trading or a long-term oriented Equity portfolioTo be successful on the stock market, you need to open and close the right position at the right time.
The term "trading signals" covers all suggestions, hints and tips to help you with this.
- In practical parlance, the term trading signals refers to trading suggestions from service providers or analysts.
- They regularly send you ideas for trades, which you can then execute, but do not have to.
- The signals can contain, for example, asset name, purchase price, positions for take profit orders and stop orders, time and more.
- Trading signals from other sources, such as artificial intelligence or other market participants (Social Trading) are becoming increasingly popular.
The term trading signal is generally very broad: There are thousands of possible sources for such trading tips, countless channels, specializations and quality levels. It can therefore be a huge challenge for traders to find the right signal services!
Do trading signals really work?
The central question that traders ask themselves is: Can trading signals really enable successful trading?
The simple answer is:
Yes, you can achieve a positive return or improve your previous results with serious trading signals.
However, you should bear several points in mind:
- Comparatively good: The average Day trading profit per day is negative, as most retailers generate a considerable loss in the long term. Even with Swing trading strategies the success rate is only slightly better. A randomly selected equity investment has a better return than the Equity portfolio of the average investor. And there are dozens more such examples. Against this background of disastrous results, it is quite easy for a signal service to achieve a better result: A few sound trading tips are already enough to achieve a positive return and thus outperform the "standard trader".
- It all depends on the quality: The selection of possible trading signals is huge, but only a few offers are really successful. Finding a reputable signal service is often just as time-consuming as making trading decisions yourself. Paid services usually (but not always) deliver better results.
- No overperformance or insider tips: In their search for trading signals, traders are easily blinded by insider tips or promises of the highest returns. But the simple truth is: anyone who has developed an extremely successful system, algorithm or AI will never share it, not even for a fee. The advantage would be gone in no time!
Reputable trading signals from reputable providers can be a good way to make solid profits. However, they are not an "insider tip for quick riches". There is also no guarantee of success here! As with all stock market transactions, past performance is no guarantee of future success!
Using trading signals correctly
Both beginners and advanced traders can benefit from trading signals, but in different ways:
| Beginners | Advanced traders | |
| For what? | The trading tips can make it easier for you to get started. With the help of the recommendations, you can place your first successful trades and learn a lot. | Trading signals can support and expand your own analyses. They are suitable for critically questioning your own assumptions. |
| How? | Attention! Under no circumstances should you just blindly follow the trading signals! We recommend that you analyze and understand the trading tips yourself and put them into context with market developments and other data | Its use is particularly worthwhile when backtesting strategies, automating or if you are planning to enter a new market or a new strategy. |
Regardless of your level of experience, we recommend that you start trading signals on a Paper Trading Account to use. In this realistic trading environment, you can trade real assets with play money.
It is ideal for testing various strategies and trading signals. By using historical data (backtesting, for example via the Trader Workstation TWS) you can find out very quickly whether a trading signal would have been worthwhile.
The paper trading account is a permanent free offer from CapTrader. Many signal services offer you a free trial period. This allows you to put a service through its paces and make a decision before a fee is due.
Recognize trading signals: Which signal service suits you?
There are massive differences in quality among trading signals. Some providers are very often right with their tips and generate a high return; others remain unsuccessful or even cause losses. The right choice is therefore particularly important!
- Before you decide on a service provider, you should put the offer through its paces. First of all, you can look at the current performance of the trading signal service. If this does not meet your expectations or if no figures are available (warning signal!), you should continue your search.
- However, do not take the promised results at face value. We recommend that you check the actual performance yourself. A Paper Trading Account is ideal for this, as you can trade here without risking your own capital. Alternatively, you can also execute the trading recommendations with small amounts first.
- Just as important as performance is that the trading signals match your strategy. For example, if you are looking for a very fast Scalping strategy for foreign exchange, trading recommendations for medium-term share transactions will not help you. Conversely Forex Signals nothing if you want to trade stocks...
- In addition, the dangers of the trading recommendations must match your risk tolerance. Trading tips often focus on small profits at low risk; however, some service providers also offer riskier signals.
Possible dangers: How reputable are the trading services?
If you are considering using trading signals, you will naturally ask yourself how reliable they are or to what extent you can rely on the information. Especially if you are buying trading signals for high fees or trading with large assets, the quality of the tips is of the utmost importance!
The picture here is extremely varied: there are both reputable trading signals and dubious providers among the paid and free signal services.
The typical dangers include:
- Weak performance: The results may fall well short of expectations or even be negative. This may be because the provider's strategy is not (or no longer) working. However, cases in which a signal service simply falsifies previous results are also known.
- The provider can sell their personal data: As with all free apps, seemingly free brokers, etc., the same applies here: If you don't pay with money, you pay with your personal data! So if you receive the trading tips on your cell phone via your own app, it is highly likely that transaction data, personal information, usage data and more will be collected in return. In addition, the free providers in particular tend to inundate your e-mail inbox with spam messages: Selling your address to advertising companies is a popular source of revenue for service providers. However, even the paid-for trading tips often cut a poor figure when it comes to data protection!
- Hidden costs: can arise in a wide variety of places. Popular scams include subscription traps, for example, where the seemingly free service turns into an extremely expensive annual subscription after a trial period. Other providers use tiered models to encourage you to buy increasingly expensive and supposedly better tips. Cooperation with an overpriced broker (you have to create a new securities account in order to use the recommendation service) is also typical.
- Claims made by service providers are difficult to verify: Is there really a team of professional traders behind the recommendations, as claimed on the website? Or is it just a young hacker who has found a new way to rip off investors? Even the advertised successes to date are difficult to verify in practice.
- AI and other buzzwords: Artificial intelligence is currently on everyone's lips and is also an absolute hot topic in trading. Numerous signal services therefore use the term as often as possible. However, the following also applies here: an excellent computer model that achieves a strong outperformance will never be for sale or passed on to other users! The advantage would be gone in an instant.
Important:
Despite numerous dangers and disadvantages, trading signals can be a useful aid to your investment strategy. However, it is essential to check the providers thoroughly before you invest your capital.
In addition to the many problems, there are also plenty of reports of successful use of the trading tips. Renowned providers deliver with their serious trading signals good input and are often right with their forecasts. However, it is often difficult to tell the difference between worthwhile service providers and black sheep.
Understanding trading signals: You should know these differences!
When searching for the best trading signals for you, you will come across a huge selection. The many offers can be differentiated and categorized according to several factors. This allows you to reduce the number of possible service providers and find the right product for you more easily.
Assets used
The simplest distinction is based on the assets that you buy or sell with the respective trading signal. For example, there are trading signals for shares, indices such as the S&P 500 and commodities, Forex Signals and much more.
It is easy to make a selection here: If you want to invest in shares, choose trading signals for shares, of course, if you want to trade commodities, use a commodity signal service, etc.
Manual and automatic trading signals
There are different methods for generating trading signals. Two central concepts can be distinguished:
1. Automatic signals
As many key figures and indicators are available, trading recommendations are an ideal area of application for automated calculations and artificial intelligence.
The systems produce such automatic trading signals independently and send them to you and other users. Depending on the service provider, the degree of complexity of the applications ranges from very simple to highly complicated. However, the following applies: simple calculations do not automatically deliver less lucrative results!
2. Manual signals
Don't trust computer-generated trading signals? Then you should rely on manual recommendations! With these, there are real people behind every single trading tip. As a rule, it is professional traders or entire teams who create and send out such signals.
How people arrive at their forecasts differs from provider to provider. The experts use different calculations and key figures or evaluate current news. The accuracy also varies accordingly.
Many traders appreciate the additional security that manual trading signals can offer: here, "real" people check the information from the computers before it is sent to the traders. Fundamentally incorrect recommendations can be intercepted in this way - at least that's the theory.
Where do the trading signals come from?
Whether human or machine, the signals have to come from somewhere. There are typically three possible sources of information:
- The technical recommendations are particularly common. In this form, price movements, volumes, volatility and other mathematical indicators are analyzed. Calculations such as Bollinger bands, relative strength index, moving averages, Williams R-% indicator and many more are used.
The evaluation is usually automated by computer systems and is therefore particularly favorable. In principle, however, these figures can also be analyzed by humans and converted into trading instructions. Such trading signals tend to be designed for the short term.
- Fundamental trading signals on the other hand, rely on information from the companies themselves: Key figures such as turnover, profit, debt and their development are considered. The resulting trading tips tend to be designed for the medium to long term and are often aimed at investors rather than active traders.
- The Sentiment analysis is a special form: trading signals are derived from the opinions of other traders. These can be analysts and other experts. However, the "broad mass" of millions of active stock market participants worldwide can also be easily captured today.
This concept benefits in particular from the use of artificial intelligence and is therefore often referred to as a sub-area of the AI tradings understood.
Free or paid service
You can buy trading signals for a fee or use a free service. In most cases, the premium offers provide better recommendations - but there are no guarantees of success here either!
Price does not always correlate with quality. In other words: trading signals are not better the more expensive they are. Conversely, there are also various free, yet reputable trading signals available.
If you are not willing to buy trading signals and instead opt for free offers, watch out for hidden fees! Popular scams used by service providers include
- Subscription models: Here you can start a free trial month, which will automatically become chargeable afterwards.
- Connection of broker and signal service: Although you receive the trading recommendations free of charge, you have to open a securities account with a broker. You can then expect far too high fees and hidden costs.
- Upselling: You achieve initial, positive results. To increase your return, however, you need to move up to the next level, which is of course subject to a fee.
Our tips for the successful use of trading signals
Despite many black sheep, reputable signal services provide good support. We have some useful tips to help you use them successfully:
- Do not view trading signals in isolation: Relying solely on a signal service is very likely to end in failure. The information is best used in combination or should be verified by your personal expertise (manual testing).
- Do not forget risk management: As with all trading activities, you should also use trading signals correctly. Money management and risk management. This applies in particular to the maximum amounts you can use for such trades.
- Use a paper trading account: We recommend that you first test all trading signals in a demo environment such as CapTrader Paper Trading Account to test. You can also carry out backtesting here to check the respective service in detail.
- Set clear expectations and boundaries: Once you have selected and checked a signal service and want to actively use it, you should set clear limits. These include, for example, the maximum loss you are prepared to accept.
- Carry out A/B tests: Don't just check the trading signals in isolation, but also compare them with your previous strategy. How does the service provider compare? What does it look like in crisis situations? How much work is required for both variants? Only the overall picture shows how good a trading service is.
Our recommendation: To get started in the world of trading signals, we recommend the provider Traderfox. It is a reputable service provider that provides a wealth of signals. This enables a sensible combination that increases your chances of success.
The website also offers exciting training opportunities and information. However, the basic warning also applies here: trading signals are no guarantee of success and should be checked by you and used with common sense.
Conclusion: Trading signals are helpful, but no guarantee of success
Trading signals are recommendations for trading assets such as shares, options or currency pairs. The tips come from automated computer systems or human experts. They are usually sent to you by push message, text message and email or shared in WhatsApp groups and similar channels.
Once you have received such a trading tip, you can implement the recommendation manually via your broker. This usually includes the name of the asset (e.g. a share index), recommended entry price, direction of the expected movement (long position or short position) and the price at which you should enter the market. Short sale) and placement of stop-loss and take-profit orders.
Both beginners and professionals can put these tips to good use. Newcomers benefit above all from the high learning effect, while advanced traders appreciate optimization and additional input.
Although these tips offer no guarantee of successful trading, some providers are convincing with their reputable trading signals. However, numerous black sheep damage the reputation of signal services.
In general, you should therefore check a provider extensively before implementing their trading recommendations with your capital. A Paper Trading Account is ideal for this phase. You should also compare the results with your own trading strategy. Here a Trading Journal invaluable services.
