What’s a tool that can help you save heaps of time trading in the market, and simultaneously help you earn profits? Quality, market-leading signal providers. 

Sometimes it’s difficult to sift through all the information you can find about different providers, so we’re going to talk about some of the key ingredients in a good signal provider. 

Firstly, let’s explain what a signal provider is, and what the difference is between a good one and a bad one. 

What is a Signal Provider? 

Signal providers offer you trade signals, often in the form of “buy” or “sell” alerts, that have a goal of helping you build profits in the market. A good signal provider will be a bridge between you and realizing profits without too much effort on your part. You’ll follow in their footsteps as they manage their portfolio, and you’ll watch your money grow. 

With a bad provider, you can lose all of your capital. You want to trust them, but as you follow the trades they make, you watch in agony as your portfolio is slowly depleted. There are two types of signal providers, human and AI trading signal providers

We’re going to elucidate some of the key factors that make signal providers successful so that you can find one that you trust, and help you realize consistent profits, regardless of the conditions of the market. 

Experience of the Signal Provider

The first factor we want to highlight is experience, both of the traders that are a part of the provider’s team, as well as the experience of the signal provider itself. 

To us, there is a huge difference between knowledge and wisdom (or in other words, theoretical understanding and experience). Anyone can learn about something to gain knowledge, but not everyone has the experience to add perspective to that knowledge, which creates wisdom. Think about it like this: if you had to get surgery done, would you rather have someone who has just read about how to perform surgery in a book, or someone who is knowledgeable about it as well, and has many years of hands-on experience? The answer is pretty obvious. 

The same idea applies to finding a market-leading alert service. You’ll probably be partial to a signal provider that has years of experience versus one that is just getting started. Try to find an alert service that has traders with over a decade of experience. This is because traders with less experience probably haven’t witnessed the plethora of varying market conditions over time. Raging bull markets, unsettling bear markets, and everything in between. With more experience, you can have a better perspective.

An image illustrates many bull and bear periods in the stock market with their variety in time.

Over the years, the stock market has seen many bull and bear periods, each with drastically varying requirements for a successful investing strategy. Image by TradingView.

At The Trading Analyst, our senior trader has been trading options for over twelve years. In addition to the experience of our senior trader, TTA itself has been around for over five years, and has earned the trust of over 11,450 investors during that time. 

The Importance of Maintaining a Good (and Transparent) Performance Record

While the experience of both an alert service and the traders that manage the service’s portfolio are important factors, it’s crucial that you also look at the performance of the portfolio. Just because an alert service has been around for a while, doesn’t mean they are employing an effective strategy. Practice doesn’t always make perfect. 

Juxtaposing a service’s experience with their historical returns is a great way to understand the strength of their portfolio. When you see that they have both experience and strong returns over time, you can have more confidence that you’re making the right choice. One way to measure a portfolio’s success is comparing its overall returns against the market.

So a good indicator for a market leading provider is one that beats the S&P 500. That’s why we have to point out that The Trading Analyst consistently beat the average market returns by over 20%. This is done by employing a strong and adaptive strategy, which we’ll explain in more detail below. 

In addition to a provider’s performance against the S&P 500, you also want to see the individual performance of trades. The Trading Analyst realistically targets 10% – 25% gains per trade. And as a member, you’ll receive frequent buy and sell alerts throughout the week so you can choose to follow in our footsteps to help you realize those same gains. 

A Strong Method of Alerts and Signals

I don’t know about you, but out of all the notifications I get on my phone, the ones I see the fastest are text messages. It takes me a lot longer to see an email. If I have a position open and an alert service sends me an email alert about a buy or sell, it could be detrimental to me realizing profits because of the delay in me seeing the information. TTA has adapted to our more modern way of living by sending you real-time text alerts. 

But what is being signaled? The Trading Analyst is very direct with the alerts we provide, sending BUY and SELL alerts based on the activity made within our portfolio. Sometimes a signal provider will let you know when a security’s price jumps or drops, but how do you know if or how they’ll respond to those movements? We want to be transparent with what we send you so it’s not a guessing game. 

Another key factor in effective signaling is the consistency in which you receive the signals. A good signal provider will have frequent, consistent alerts that you can rely on. With TTA, you can expect an average of 2 – 5 per week.

The Effectiveness of a Clear, Transparent Trading Strategy

So far we’ve discussed experience and performance as key factors in what makes a trading signal provider a cut above the rest, now let’s add another layer: strategy. 

Having a clear, defined, and flexible strategy helps guide the direction of the portfolio. It’s easy to earn profits if you long positions in a bull market, but what if the market starts heading into bear territory? A clear risk management strategy can be the torch bearer in the darkness of volatile markets. 

If you are reading about an alert service’s strategy and the information seems nebulous, how can you trust that they have a defined strategy and methodology behind each trade? You want to find a service that is open about their strategy, and is clear about how it is defined. This includes having an entry and exit strategy, using effective forms of analysis such as technical analysis, and the practice of proper risk management to protect against heavy losses. 

The Trading Analyst’s top priority is risk management. According to our record, we have more wins than losses. But here’s the kicker: When we lose, we lose less than when we win. We do this through risk management.

In our very own trading strategy, we accomplish this by putting potentially viable securities through a number of filters, as well as looking for key indicators including technical analysis (with a particular focus on trading volume), limits to market capitalization (we don’t trade small cap stocks due to inherent risk), and screeners for certain activity.

If you fail to plan, you plan to fail. So in addition to using key indicators and employing various forms of analysis, we want to go into each trade with a plan by clearly defining an entry and exit strategy as well. One piece of criteria we use to sell, for example, is calculating the difference between the top and bottom of the securities price range in resistance and support lines, and using that number as a target to sell the first half of what we own. 

The point is, market leading signal providers will be clear and transparent about their strategy. And not only that, but they should be concrete and succinct, not full of nice sounding words, or ‘fluff.’ 

They Should Provide Traders with Educational Material

Providing people with helpful information in the form of articles, videos, and guides adds to the wholeness of the resources and tools a signal trader can provide. A great signal provider will do more than just send you effective alerts. They’ll also provide you with a number of helpful trading resources which enable you to become more knowledgeable on the market, trading, and everything in between.

One reason for this is, if you read information that’s fruitful, and it’s information you can trust, it can supplement your decision in finding a good provider. If you see a provider is posting articles, but they’re full of nonsensical information, that doesn’t really instill the trust or confidence that’s warranted in a trading signal provider.

Watch Out for Red Flags: Unrealistic Promises

It’s easy for people and businesses to glamorize their profits online by only sharing their gains. What they aren’t showing is the other side of the coin, colossal losses. Anyone promising huge gains is usually employing a very risky, unsustainable strategy— and capitalizing on the human emotion of greed. While the axiom goes “risk equals reward,” remember that high risk can also equal huge losses. 

At The Trading Analyst, our focus isn’t finding moonshots. We use a strategy that focuses more on long-term, consistent profits that target 10 %- 15% gains per trade. Over time, these gains accumulate, and our losses are hedged. The name of the game is to lose less than we win, so we make proper risk management our prime concern, and that’s the key to the success of our strategy. 

Find an alert service that is promoting a realistic performance—because if they’re promising gains that seem too good to be true, then they probably are. We share the performance of our portfolio and specifics about our strategy & alert-service, so you can always check out the rest of our website if you want more information.

In Summary: The Essence of a Good Signal Provider

In essence, a good signal provider embodies the factors we’ve discussed above. Make sure that when you are choosing a provider, you find one that doesn’t just represent a couple of these factors, but all of them. Market-leading signal providers are the quintessence of all of these crucial aspects. 

You can trust one that has a track record of success that speaks for itself, experience which accompanies that success, and a clear and effective strategy that helps give direction and buoyancy in volatile markets. Further, ensure alerts are provided in a practical manner, with helpful resources to boot, and lastly, watch out for unrealistic claims that sound too good to be true.

Trading Signal Providers: FAQs

Do You Need a License to Sell Trading Signals?

You do not need to have a license to provide trade signals. A provider does, however, need to be very careful not to offer advice or recommendations, as this would require them to be licensed as an investment/ financial advisor.

A provider should only offer information about the trades they are making for the portfolio. That way it is left solely up to the subscriber what they do with their money, and their decisions aren’t guided by advice. They cannot say “you should buy, or you should sell” without being properly licensed; they can only lend the raw information about the trades they place.

Another reason why a license is not required is that the signal provider has no control over the subscribers’ money and how they use it, as this would also require a license as a money manager.

Do Professional Traders Use Signals?

While this question depends on each professional’s opinion, we can say for certain that there are professional traders that not only use signals, but rely on them.

If a professional trader has a long record of success following their own decision making, then they might not use trade signals, as they don’t really have a need. But it’s not uncommon to be a professional trader (which essentially means trading eight hours a day and earning enough income from investing to live off of) to use trade signals as their lifeblood.

If a professional trader finds a market-leading signal provider that’s consistently beating the S&P 500, and they allocate enough capital to the trades they place, they can potentially live off the income from the profits they make.

So it really comes down to the individual and whether to use signals or not. But again, there are, unquestionably, professionals that use signals as a part of their strategy.

Are Trading Signals Profitable?

It is definitely possible to profit by following trade signals, but it is also possible to lose money following them. 

The essence of this article touches on the quintessential pieces of a market leading provider. Good providers can help you profit, and bad ones can lead you to lose your money. Remember that in order to profit from trade signals, you need to not just make more than you lose, but make more than you lose, and be able to pay back the money you spent on the signals. 

How Reliable Are Trading Signals?

The reliability of trade signals depends entirely on the key factors that create the structure of the provider. 

For every factor you add, it can increase the reliability of the signals. Having a long history of profits and a portfolio that consistently beats the market is a telltale sign that contributes to making the signals more reliable. Having experience, and a strong, clearly defined strategy that backs up those profits makes the signals even more reliable. 

The information in this article will help you determine the reliability of the signal provider, and therefore how reliable their signals are. For each element a good provider embodies, it can increase the trust you have in the information they provide.