The forex market can be a ruthless place, destroying 90% of the traders that dare enter.

Understanding the market and developing a strategy can take years and there is no guarantee you will be profitable. Luckily, in the past few years another option has emerged: let professional traders and systems handle your money while you sit back and watch. Instead of taking the time and energy to fully develop your own portfolio, you just need to find the right signals to follow. For those of us without thousands of dollars to spend on financial advisors or access to exclusive CTAs or hedge funds there are basically two options: Signal providers or automated trading programs.

Signal Providers

Signal providers are experienced traders who give you access to their live trades. Traders send out a signal or enter a trade that is either sent to you via email, instant message or automatically entered on your account. These signals can come from a discretionary trader or mechanical trading system and usually contain an entry price, stop loss and take profit. Some of the more popular service providers are ZuluTrade, Etoro, and ForexSignalProviders among many others.

Advantages

• Experience: Signal providers allow you to follow profitable traders and analyze their performance so that you can select traders you trust and fit your investment goals.


• Easy: Signal providers make trading as simple as possible. You just have to wait for a signal or have the trade automatically entered on your account. It doesn’t get any easier than that.


• Diversify: You can choose as many signal providers as you want to diversify your trading portfolio.

Disadvantages

• Portfolio risk: Though individual signal providers manage their own trades, correlations between signal providers could leave your whole portfolio at risk.


• No backtesting: While you can see the signal providers historical performance, you can not see how the traders would have performed in different market conditions.


• Anonymous signal providers: With most signal providers you know very little to nothing about them or their strategy.

Automated Trading Programs

Automated trading programs, as discussed in my earlier blog post, are computer programs that monitor the market and automatically enter in trades based on pre-calculated conditions. While the automated trading industry is filled with scam-like products, take my review of Fapturbo, there are viable options for investors who are looking for a little more control than blindly following a signal provider.

Advantages

• Emotionless trading: One of the biggest advantages of using an automated trading program is that they aren’t subjected to feelings or emotions, the downfall of many traders.


• Customized strategy: You can customize your automated trading strategy to fit your individual investment style and risk tolerance.


• Risk control: Automated trading programs are able to measure the risk and exposure of every trade and calculate the optimal trade size.

Disadvantages

• Mechanical issues: As with any computer program, there is the potential for technical issues. This ranges from power outages to program bugs.


• Market variability: Automated trading programs can have difficulty adapting to changing market conditions. Without a retraining or updating process, there may be periods of profitability followed by long droughts of losing money.


• Black box issues: Some automated trading programs are “black boxes”, where you can’t see how the trades are calculated. This can be frustrating when your program becomes unprofitable seemingly without cause.

Whether you go with a signal provider or an automated trading program is up to you and your personal investment goals. Either of these approaches allow you to trade like a pro without investing time in developing your own strategy. However, there is still a lot of time and effort that must be put into selecting and managing your portfolio. Every hour you spend on researching and selecting your professionals will save you a lot of money and headaches down the road.

Best of luck on your search!