Can live trade signal services benefit you as a trader?  I’m not talking about an auto trading service that trades for you, but rather, a service that uses their trading systems to call out live trades for you to take on your own.  There sure are a lot of them out there.  They can’t all be winning or it would be illegal, right?  So what are the pros and cons to live futures, forex, or stock trade room/signal services, and how can I tell if it is a good fit for me?

First of all, let’s assume that you have whittled down your search to a few contenders that have passed your basic due diligence.  Telling you how to do that is beyond the context of this article.  The signal service space keeps growing and growing.  The last Google search I did produced 20,200,000 in 1/3 of a second.  Unbelievable!  So assuming you’ve done this preliminary work, here are some pros and cons.

Pros

Experience - You can learn from the host’s (moderator’s) experience.  Hopefully he/she has been calling trade signals for a long time and has many hundreds if not thousands of live called trades under his belt and a solid winning record to go with it.  If so, you will gain enormous benefit from his experience.  Remember, experience is something that can not be taught.  It can only be acquired by time in the markets.  You can short cut this process with a good signal service.

Learn a Trade Method(s) --If he is trading a methodology that you are interested in or learning, you will be able to master the techniques of that trading strategy with a mentor by your side.  A two way interaction via chat should be a prerequisite so you can ask questions and get them answered.  Also, you can decide a method is NOT for you in this way.  It is important to select a service whose method fits your style and personality.

Learn Discipline -- If he has a winning record then for sure he will be disciplined, and you will not only learn the necessity of that ability, but you will also gain priceless confidence when you see the ongoing positive results.  Without confidence, you’re "dead" so to speak, because as soon as a commonplace 4 trade losing streak occurs, you’ll stop trading and miss the winners.  That’s what quitters do.  This is all essential to the learning curve and most traders learn it the hard way or never learn it at all.  A good signal service will teach you the importance of discipline

Profit – I put this last because I believe teaching a trader how to trade is more valuable than giving him trades.  But there is value to just getting (and taking) trades.  Profit!  You can grow your account and profit from the winning edge that the signal service provides so long as you are well capitalized, can follow the plan (no easy endeavor) and minimize mistakes, host included;  lets face it, they’re humans too, and humans make mistakes.  It’s a part of trading so keeping it to a minimum is very important.  But if you did your homework, you selected the service for a good reason or reasons than you should benefit from the good trade signals.

Cons

Seduction -- Mistake Numero Uno!  Beware…a good signal service will seduce you when you begin to see winners and you’re still watching from the sideline.  This will lead to the risk of beginning to trade real money too soon.  Heed this advice.  Wait!  You need to first get used to the trade signals, prove you can execute the trades properly, but most importantly, you need to witness the losses and the winners for a good amount of time.  Keep track of the room results vs your own to make sure you can duplicate them.  Will the losses shake your confidence?  Most likely, yes!  That is BAD for your trading so you need to take your time and develop a trade plan that you can fully believe in, based on the results of the trade signals.  No easy endeavor.  Unfortunately, there are no real short cuts either, unless you are just devoid of emotion and can trade with 100% detachment and discipline.  Yeah, right!   Therein lies the number one danger to a ‘good’ signal service.  Notice I didn’t say ‘bad.’  The danger is YOU so fix that before you begin real trading.

Mistakes – either you or the host will make mistakes at random times.  Usually it happens with winners (that are missed) or stops that are mismanaged.  The end result is missing the winning trade but then, catching without mistakes, the losing trade.  Yikes!  That will kill your confidence in the signal service and an otherwise effective trading system.  This happens from time to time.  What you need to keep in mind is the following.  Is the host honest about it or does he make excuses?  Is he decisive with his trade signals giving you enough time to take the trade in the first place? Sometimes the markets move too fast and nobody could’ve called the trade but those should be few and far between.  Does the performance of the trade signals recover despite a random mistake from time to time?  Does the host/mentor help you develop and utilize good trade habits?  Does the signal service have a quitting plan that keeps the results moving upward and to the right?  You should know the answers to these questions before you trade live.

Dependency/Complacency – If it is a good signal service and you prosper from it, will you grow dependent and forget (or never learn) how to trade?  What happens if the talented host moves on and ceases to call trades?  Hopefully you would have taken what you have learned, invested in the trade system if possible and would be good enough to host your own room.  Not that you’d want to, but you should aspire to achieve that level of skill.  Otherwise you are at the mercy of someone else’s performance and that can’t be good. 

Responsibility or Lack Thereof – It’s easy to blame the signal service or the trade system rather than take responsibility for your own trading.  That’s a losing proposition.  In the end, you’re the one who has to pull the trigger, trade after trade, and live with the consequences.

I’ve listed just a few important things to think about regarding trade signal services.  The most important thing to remember is that YOU have to live with the consequences of all your trade decisions.

Troy Noonan a trading coach of NetPicks has traded for over 15 yrs and offers free educational resources, live signal services, and proven trade systems. Free 2-week signal service trial