Signal service skewing results: Is this normal?

I like to use signal services for my forex trading. I'm just not confident enough in my abilities to make a consistent profit. So while I'm learning the trading style and systems that work for me I use these services to make some money in the market and get hands on experience in a live account. So far it has worked out pretty well for me. I won't mention which signal provider it is. I dont' want to bash or advertise for anyone.

So the issue that I have is that my signal provider seems to skew his results on the positive side. For instance he could be up 1000 pips in a month and yet I'll still loose money. Typically this is how it goes:

1) a signal is sent out.
2) you enter your trade with your maximum risk (Mine is 2%)
3) Trade goes up 50 pips, close 50%
4) trade goes up another 50 pips, Close 25%
5) trade goes up another 50 pips, close the rest.

For this one trade we are now up 150 pips. Which seems a bit skewed. you see I would have lost my full 2% on the 50-100 pip stop loss but we somehow gained 150 pips and I only really have a 2% gain. I like the profits are taken and locked in but it seems a bit shady that they want to add pips on a single trade signal instead of say averaging the close prices.

Is this normal? Are there any signal services out there that don't skew the numbers in their favor.

Nic

I feel like my first example does not really do the question justice. In my first example the trade is up 150 pips and well most would say that's legit. So here are two more examples which might clarify my question.

1) signal sent out
2) Trade up 50 Pips, Close 50%
3) trade of 150 pips, close out the rest

The trade in total was up 150 pips however the signal Provider would consider this 200 pips.

or

1) Signal sent out
2) trade up 100 pips, close 50%
3) remainder goes down to 75 pips, close the rest.

Were up 175 pips when the trade really only went to 75 pips.

To be honest I think they all make the numbers look good in their favor. It's very hard to find a good reliable signal service provider, and to be honest even if you do, you still are putting your money in them blindly hoping they can turn a profit each month. Instead what I would do is learn how to trade and to be able to rely on yourself. Start with a demo account. I realize you are already here, and learning to trade. Instead of focusing on making a profit with someone else, once you feel comfortable in a demo, open a small account with $100 dollars or so. This will make the trade that more interesting. Hope it helps.

Dr. NoStopLoss

Pick your trades at random and you will do better than any paid service.
Do you really think they have the "magic bullet" ?

I think that when I started my Forex Journey I did just that, Pick trades at random. I blew out several demo accounts...so I gotta say from experience. this really isn't good advice.

Thanks for the advise I guess there goal is to always get new subscribers so there performance always needs to be a little skewed and to be honest I expected that. I really didn't think I was going to get there exact numbers. But I really didn't think they would skew them so much you know. In my projections I expected a 30% difference for actual performance but it's just mind boggling to me that someone can have a positive pip count on the month and a negative return value.

Like others have said signal services are crap. Most of them only tell you to "buy" or "sell" anyway, with no regard to limiting risk with a stop or designating a take profit objective. You have places to do both but neither make much sense in terms of evaluating what the market is doing. Don't put your money on any of them, just keep it in the bank until you can demo trade profitably on your own. Greed is the reason many new forex traders lose it all - no patience and think "how hard can this be?".

I used one signal service for a month but for me it didn't work. Didn't work because of my skill + maybe was the signal provider not accurate. He always posted Graphics about different pairs, using Elliot wave counting technique and provided multiple signals per one day, with take profit and stop loss points and opening positions and some of them did really hit and some of them failed. I with some magical superpowers ALMOST ALWAYS picked the ones that ended with SL, I maybe had 4 signals that took profits... so yeah, there are some working signal services but it is still not the same, better learn by your own and relay on yourself.

One thing that is repeated over and over in forums regarding signal services and system vendors.
"If they are so profitable, why do they need to sell anything? Why not just trade themselves?"

I suppose that there may be a few genuine sellers out there, but the vast majority are scam artists and liars.

If you can't be profitable with random entries, you still have something missing in your trading skill: managing your trades ... regardless the entries.

Someone here explained it very clearly ... and I love his way of thinking. Just take a look at Ronald Raygun's profile ...

I don't agree with that statement at all. This is a skill to be learned. While there may be some unscrupulous services out there, a blanket statement like that is quite misleading to new traders.

Go to the Systems for Traders website. They have done reviews of various signal services and magic indicator systems. Not one has stood the test of time.
New traders are not being misled when people post that signal services fail.
Are you selling signals service or an "enter on arrow" indicator by any chance?

Using a signals service usually comes in at a phase of a trader's career after they have searched for the 'most profitable' trading system and failed at it. The signals service phase is just a repeat where traders tend to hop from one signal provider to another before losing a decent sum of money on the paid signals as well as risking their capital.

That's not to say that all signal providers are crappy. Losses are part and parcel of fx trading. It comes down to how you manage your losses.

That being said, most signal providers tend to make nice looking numbers to attract subscribers.

After been there, done that, if you really want to put your capital in the hands of a signal provider, then you are better off using a signals provider from off this forum. There are quite a few reputable members who regularly post their signals.

Actually, I just started doing so with a couple of friends of mine. However, I've been on this forum for years and have several people that can vouch for me, my experience, my contribution to newbies and my results. I'm not here trying to sell anything, I'm simply saying that blanket statements are not accurate. Someone somewhere is making money using reputable, profitable signal services. To slam all of them by saying it's better to pick trades at random is, I believe, a very inaccurate statement. It goes back to that 95% of all traders fail. Really?? how did anyone arrive at that figure? 9 out of 10 people interviewed in a "rookie" forum would definitely give you a 90% failure rate. But if you go to where the guys who are making money are and sample them, then you'd get a different percentage. 95% of what traders? traders with how many years of experience? what methods, strategies, training was employed? what age or demographic was surveyed? Many variables come into play when we look at statistics but it's the criteria that you never see.

I do agree with you that there are a lot of people in it for the money (as we all are) in this business and have no desire to help people, but to just use them as a cash cow as they're blowing thru trading account after trading account.

There are a few signal services that do work but they usually come with a hefty fee. On the services, yeah, most suck and no matter how you look at it.
It all comes down to "how good they really are" and remember, if it sounds too good to be true, it probably is..

True..well said.

Blanket statements serve some good purpose in this particular situation. It's like EAs and "robots" - sure, someone out there is making money with them. What exactly does that mean though? In the long run, not much. Somebody is always going to get lucky, and I would guess that not but perhaps a fraction of a percent of EAs/robots/signal services are from an experienced trader who knows what to look for in being consistently profitable over the long term. Complete waste of time and just another manifestation in the search for the holy grail....trying to take the easy route in trading is almost guaranteed to lead to severe disappointment.

I want to answer some misguided points that have been made in this thread.

1) Why would a profitable trader have a signal service or mentor students.
a. To smooth the equity curve a bit.
b. Some trainers are actually good people and want to help others. Why should their valuable time be worthless though?
c. Why did Sam Walton open a second Wal Mart? A third? A fiftieth? A thousandth?
d. Paul Tudor Jones, John paulson, George Soros, Scott Cohen, all fantastic traders. Why would they want to take on customers in a hedge fund?

2) No one can be consistently profitable over the long term day trading FX.
a. Go to zulutrade.com. There are traders there with two plus years of magnificent returns with over a thousand traders following their trades. These guys get paid to offer this and they should. If you can mirror the trades of a successful trader while learning to trade for yourself why wouldn't you be happy to pay a fee to do so. Many people have a job or lifestyle that doesn't allow them to trade when the market is active. These trade mirror services give them the chance to make a profit with risk money without being up and watching a computer for hours on end.

3) The signal service didn't work for me.
a. It seems like every trade I DECIDED TO TAKE hit stop loss. If you are going to follow a signal provider you owe it to yourself and the provider to take every signal. If they are legitimate they will have a verified trade history through my fx book or another of the stat services that includes all of their trades. If you only pick the ones you think will work and they all lose maybe that is YOUR problem not that of the signal provider. In fact that is the reason many people are not successful at trading in general. The trades that are mentally the easiest to take are generally the worst trades.

There seems to be a pervasive mood on this forum that all commercial interests are bad. Many here seem to think that all information should be free. Many seem to think that successful traders should give away their knowledge to somehow repay the world for their streak of luck. I can tell you that I am successful and there isn't one shread of luck involved. I paid for my trading skills in lost money and years of struggling to figure out what works. If I could have paid those losses to a mentor and come out at the end with the same knowledge I would have gladly done it as it would have saved me several years.

I have been asked by friends to trade for them. I have been asked by other traders to mentor them. I have said no to these requests. I have a thread on this forum where I help other traders with nothing asked in return. If I decided to offer trade mirroring through one of the websites that make that service available or decided to open a mentorship program teaching my principles would I suddenly that day become a monster? Would I suddenly be a crook just because I decided my time was valuable enough to ask for people to pay for the use of it?

There are profitable traders. There are legitimate trainers. There are legitimate trade signal providers. The key is that the person considering these services must do a little homework to make sure they are getting what they pay for.

My apologies to the original poster, I for got to answer your question.

If your provider is scaling out of trades and adding up the pips from all the pieces to represent bigger wins you need to find a more honest one. I personally don't scale out of day trades, the expectancy is better (provided you have a winning method) if you hold the entire trade to the take profit. If you are stopped out you take the full loss therefore if you reach a take profit you should also get a full win.