There are some red flags that should be easy to spot that will help you to protect your Forex account. Many of the traders available as third party signal providers look good for a few weeks, or even months, but are really just ticking time bombs. Don't be around when the timer stops.
This article is meant to assist you in uncovering and bringing to the front a few items you need to be aware of and avoid. Do not consider it to be an all-encompassing document of alerts. Look for:
Trading With No Stops
Avoid any and all traders without stops. The trader may look fine but there are uncontrollable factors that are lurking that you cannot avoid. Factors such as power outages or connection failures can affect you because the market runs fast and far on incoming news. You must avoid this type of trader like the plague. It is the first pitfall that a trader learns to steer clear of.
Win Sizes Out of Proportion to Losses
When a good trader is looking at a loser he may get agitated and pull profits off the trading bench with an unexpected early move. This is good. You certainly want to cut your losses in order to expand your wins, and this ploy should result in more wins than losses. The trader though who has a disproportionate win/loss ratio on his books, i.e. 200 losses, 10 wins, is not the trader for you. Do your research.
New Accounts
New traders will not per se raise a red flag. They should be circumvented, however, because of a lack of track record. You should not trade with anyone until you can track a decent history, of say, six months to see if he is a survivor, and by then, you will have a decent amount of history to analyze. Wait. Do your homework.
Big Winnings Following a Draw Down
Abnormally big winners are the sign of a trader who has seen the end of an enormous draw down and is betting it all on one last ditch effort. The account indeed recovers and to the new onlooker's eye, the guy looks like a true winning trader. The reality is for every 10 tries, the trader is lucky if even 2 make it to survival and recovery. These are the 2 that are wafting about in cyberspace searching for you. At their next draw down, they will almost certainly go for the "hail Mary" pass and the end could be ugly. Better not to pray your way into a winning situation, stick to more scientific methods.
That wraps up this article. As stated earlier, this treatise is only a glimpse of the evils that can befall the unwary Forex explorer.
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