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What makes a great signal provider & can I make money selling signals?

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  • What makes a great signal provider & can I make money selling signals?

    What does it take to be a successful signal provider?

    I count myself as a veteran in this segment of the industry. I think you’d be hard pressed to find anyone with more experience offering access to a wide variety of traders through the use signals with such mixed results.

    You might be surprised that virtually every day I’m contacted by a new trader wanting to join our site and offer their signals. Since the sites inception I have launched 20-30 different traders in the trading room and on our trade copier. During this journey I’ve developed a great understanding on what kind of trader and strategy makes a marketable signal. Most traders think it’s just about making money, however there is much more to it than that.

    Before I start it's important you understand the following points.

    • You will need verified history showing that you are a profitable, consistent and experienced trader before you start.
    • Most signal followers are following you with accounts of less than $5k
    • Potential new customers treat online forex vendors with extreme caution, so you need to earn their trust.

    Show me the money!
    Are you making money on your account? If the answer is anything other than a resounding “Yes!” then stop right here. Unless you’re account is positive there is no way people are going to follow you. I don’t care about how magnificent the recovery is from your drawdown, it means nothing unless you are generating a profit.

    Consistency is key
    As a signal provider you need to give your followers comfort that you can be relied upon to stick to your strategy. You’re not expected to generate returns 100% of the time, however you are expected to trade in a predictable way.

    Any sign of emotional or revenge trading will send your followers running for the cancellation button.

    Show me that sexy equity curve baby!
    Imagine your growth chart as a snowy mountain and you are standing at the top about to ski back down to the start. If it looks like a bumpy ride or even worse, you might get stuck half way, then you can bet that followers aren’t going to want to ride it either.

    Here are 3 different accounts, all profitable, but with significantly different growth charts

    Sexy Curve.png
    Subscribers love this type of profile and the longer the run (trading history) the more people will follow you. After 6 months it you will develop momentum as followers become more and more comfortable with referring their friends and family onto your signal as well as recommending your trading on public forums.

    Acceptable curve.png
    A bumpy ride and slightly extended drawdown period below the watermark high early in the chart will make followers a little nervous. People will still follow your trading, however they will likely wait for longer trading history before joining.

    Ugly Curve.png
    This chart is still profitable, however what makes the history almost useless is the return to the starting balance towards the second half of the growth chart. There is too much volatility and not enough dependability. If you’re chart looks like this you won’t be successful in attracting followers.

    If you do hit a losing period you’ll need to recover the drawdown by a factor of 2 before you can expect people to start following you again.
    This comes back to the first point on consistency. Your reliability will be shown through a smooth equity curve.

    What trading style/strategy is most popular
    Traders like activity and traders that are paying you a monthly fee demand it. If you don't show them some action then they will quickly get bored and move onto a more active trader (even if the returns are not as attractive).

    I realise the market doesn't always give us an opportunity to enter, so please don't confuse this advice with an encouragement to over trade. However if you have a strategy that only trades a handful of times per month then it will not be successful as a signal service. The most popular strategies tend to have the following features:
    • 5-10 trades per week
    • Fixed stop levels
    • Primarily trade the majors (EURUSD, GPBUSD, USDJPY, AUDUSD)
    • Profit targets of 10-30 pips
    • Risk/reward of at least 1:1

    These aren't hard and fast rules. Every strategy (assuming you're consistently profitable) will attract followers because people have different tastes, but I've never seen a signal that is significantly outside these parameters capture a lot of attention.

    As a side note - it's worth mentioning that followers like to trade the major pairs because it's more familiar to them. Even though they may not know how to trade profitably themselves, people like to feel like they have some control over the situation. By being able to tell a good trade from a bad trade (in their opinion) it allows them to place judgement on your trading.

    Trust me, I’m a faceless internet marketer
    Before a follower decides to subscribe to your signal they will need to be able to trust you. After all, they’ll be putting their hard earned money in your hands in the hope that you’ll take care of it and make their account grow.

    To build trust you need to show a live verified account of your own trading. I would recommend trading an overly large account if you can afford it. If you have $50,000 on the line then you’re much more likely to trade responsibly than if you are only controlling $500. A large account also shows the public that you are a legitimate professional and not a kid in his basement risking his pocket money.

    If you are selling signals on your own site I also recommend being present and visible to existing and potential customers. Always reply to emails promptly and ensure you keep your followers up to speed with any changes to your strategy or interesting observations in the market.

    Another good way to engage with the public is through forums. But before you jump into this the zoo of trolls and tools make sure you’re aware that forums can be brutal and test your self resolve. Even when you’re winning you’ll have people criticizing your trading and predicting your imminent downfall. I’ve never met a trader that can engage on a public forum and trade effectively at the same time. Imagine having hundreds of backseat drivers all offering their opinion (in hindsight) of every trade you ever make.
    'Why didn’t you do this", "You should change that", "Have you ever thought about trading at a different time of the day", "I know a guy that is a heaps better trader than you because he has a special indicator – why don’t’ you trade like him?"
    It’s enough to make you want to throw your computer out the window. But be careful - your response to these questions will make a big difference to the public's perception of you. So stay cool and professional!

    Creating your own site to sell signals.
    It seems every signal or EA vendor that I come across tries to build their own site (without the assistance of a web developer). This is a HUGE mistake.
    Your website is your shopfront. If it looks like an amateur put it together then visitors will associate it with lesser quality and be less likely to sign up as a result.

    Most traders I speak to will say something like “My trading performance is all that’s important”. Trading performance is very important, as I’ve discussed, your equity curve and profitability is paramount, but that is not the ONLY thing that is important when operating as a forex vendor.
    You can get a professional website built for $500. If you are serious about being successful as a forex vendor then make the investment!

    How much should I charge?
    The answer to this question goes back to one of my original points that most customers are trading with less than $5,000, so the returns that people can generate based on a small account will have a bit impact on how much they are willing to pay.

    I'm a big believer in keeping it affordable with a free trial period so your new customers can get acquainted with your trading and the process of running the copier software. It's better to have 50 people following at $50 per month than 25 at $100 per month because the more people you are trading for (and hopefully making money for) the bigger your referral network will become.

    How much money can I make selling signals?
    This is something that every existing and potential vendor wants to know. The answer depends on how successful you are at following the advice above

    The best signal providers on the internet have between 100 and 500 customers based on my experience and research.

    Keep in mind that selling signals is a stepping stone to becoming a money manager. While the majority of customers following signals are using smallish accounts, there are a handful with $100k+ and connections through to investors with millions.

    Once you show you can make money for people then doors will start to open and that's when it gets really exciting.

    To recap all these points:
    1. Prove you can make money trading for yourself through consistent verified trading history
    2. Develop trust by being transparent and accessible to your customers
    3. Create and foster a professional online image
    4. Set the monthly price at a level that is appropriate for people to make money on accounts below $5k
    5. Make money for your clients!
    6. Keep making money for your clients!

    If you can follow these guidelines the world will be your oyster.

    Good luck!

    Click here to check out the most popular forex channel on YouTube

  • #2
    Very insightful Nick, I disagree to None

    Thanks for the info.
    Trade the market, not the trader


    • #3
      good article Nick. Well done!


      • #4
        Great advice.



        • #5
          Nice write up.


          • #6
            Very good points Nick. I personally think consistency and transparency are the two most important factors for long term success and client retention. I think the "smart" subscribers, which are ones who will wind up being loyal, long term clients will put consistency, transparency and capital preservation above returns and/or account balances. In other words, how much profit you can make or how large an account you have is not as important as how well you protect their money and the consistency of your trading. There are gamblers out there, both traders and investors/subscribers which will come and go like farts in a wind storm. I've seen that more than once in the short time I have been here. It represents the bulk of this market, which is why I felt there was a niche for a "safe", aggressive, performance based signal.

            Since I am not in a position to risk a large sum of my own capital, I will have to rely on being communicative, consistent and transparent with my trading to keep and hopefully attract more clients. I actually have found that I trade better with the "pressure" of knowing there are people depending on me to protect their capital. Maybe it's my age, or 25+ years of business ownership that helps me in that regard. I know what it takes to cultivate and keep a loyal customer base. I learned a young age to make sure that I can deliver on a promise before I make it. I learned to think worst case instead best case. I learned sometimes saying "no" makes your clients happier than "yessing" them to death then falling short of what they expected.

            I learned the importance of communication and being accessable. Whether I have 5 loyal subscribers or 500 it makes no difference to me. I never set out to be a signal provider but was fortunate enough to be afforded the opportunity here at LFT and it really has made trading more enjoyable. I am doing something I enjoy, making some new friends, learning new things, and I am getting paid for cant beat that!

            I think that you will see that this period will mark a "turning of the corner" as far as consistency on your accounts based on the current "roster". The "10 bagger" in 2-3 years may be a bit of a stretch but I am sure after what you've has gone thru the last 12 months, you'll trade consistency and smaller gains for all the drama...or maybe may be the mountain climbing, sky diving, bungee jumping type....

            Either way I wish you, all the signal providers, and their subscribers the very best for the remainder of this year and look forward to an even better 2014!

            Happy Trading!

            Last edited by Turtle Forex; 11-16-2013, 11:49 PM.


            • #7
              The very first time my eyes can see such clear and REALISTIC advices to the vendors. I'm more happy then most of the guys here - simply because to be a signal provider/running my own website it is my new born baby.....big appreciations Nick for sharing your definitely wide experience.