Free forex signals? Relying on algorithms derived from math and physics to make trades doesn’t mean we can predict the future. It does mean that we have a strategy based in the real world, not just patterns in the charts.
Back in 2013, just before opening access to fractalerts, we wanted to run a test to see what the competition for trading signals looked like, to get a feel for the other kinds of services that were out there. Turns out there are plenty.
We subscribed to 800 of them: forex robots, trading signals, forex EAs (“expert advisors”), email lists, you name it. Of those 800, we only found four that actually used the material they were selling to trade. The other 796 were just selling untested ideas. They hadn’t done any of the legwork themselves and, most importantly, they had no skin in the game.
We realized something: there will always be orders of magnitude more of these kinds of companies. Why? Because it’s orders of magnitude easier to start selling worthless products. There’s no barrier to entry.
There’s an old saying: ask 10 rabbis about the Torah and you’ll get 100 opinions. Well, if you ask automated robots about the markets, you’ll get a million opinions, a billion search results – as many as you want. That’s what these robots do. They develop ways to explain the market, and they can produce as many as they want. If a company isn’t taking the time to actually test hypotheses, then the number of hypotheses goes to infinity, while their value goes to zero.
So it should come as no surprise that all 796 of those “firms” – forex advisors, trading robots, trading signal programs – did whatever they could to get unsuspecting traders to bite. They offered free forex signals, worthless guarantees, pages of “evidence,” but they were just noise. There was no cash backing up their positions.
In short, if a trading service has a free trial, then their information is worth just as much: zero.
If a trading service actually has money behind it, then the trial has already happened. Their money is on the line, meaning it’s far more valuable than something given away for free.
At fractalerts, we don’t offer a free trial, even though we get asked constantly. By giving away even a single signal, we’d be devaluing the information that thousands of investment firms and traders rely on.
Traders love to reassure themselves by backtesting strategies. Which is fair enough. After all, you can only use the evidence you have to draw conclusions. And what worked in the past works until it doesn’t, which may not be any time soon. But no matter how much you backtest, the results just aren’t predictive. Today’s market has priced in yesterday’s patterns, so any strategy that succeeded in the past can be expected to gradually see its predictive power – and value – whittled away by time.
Backtesting has some limited value, but we draw the line at comparing backtesting with real market data. If you’re investigating different trading algorithms, look closely at what data they’re using to make claims. Is it the money in their fund? Is it success stories from their clients? Or did they just run a simulation to show what they could’ve made?
There will always be 796 companies selling you a guaranteed profit, a perfect strategy, a sure thing. But they are basing their claims on simulations. Look closely for the four firms – the 0.5% – that actually trade their recommendations. They’re hard to find, but so is anything valuable.
Want to learn more about how math and physics can improve your trading? Take a more analytical look at the markets and remove the emotion… and misperceptions that run infectiously through the minds of most traders. Fill in the form on our home page and a member of our team would be happy to give you a call or engage via email.