100% Hit Rate Is Not Possible
Due to the probabilistic nature of trading, each trade’s outcome is unknown. Technical Analysis is not a science but an art, that provides us clues of price’s future movements. A profitable trading system simply has more probability of winning than of losing, and it is impractical to trade with 100% win rate.

It may seem possible to achieve such win rate, but watching numerous reports of winning traders clearly proves this point. Even top traders does not win more than 60-65% of their trades – their overall performance is not due to their high win percentage but due to the quality of their trades, their Risk:Reward.

High Win Rate May Have Its Cost
Some trading systems take trades with very high win rate, sometimes 90% or even 100%. In most cases, this high win-rate comes with a trade-in, in Risk:Reward, specifically: a very low one. By trading with giant stop loss and a small take profit, one can manage to take small profits in very high win percentage. Big stop loss allows big margin for error, so trades are usually winners. This performance misleads clients to think that this is the holy grail.

Actually, such low Risk:Reward ratio leads to financial ruin. One loss will wipe out profits of many profitable trades and lead to vanish of Equity.

Conclusion
Be careful of anyone promising you the Holy Grail, and be extra careful of services that claim 100% profitability. Even if their results are honest, such high win rate usually carries unwanted side effects.

Money Management is a crucial element in your trading success, regardless of your trading system. In this article you will learn the importance of Money Management and simple rules to help you from situations like the above.

A Trade Is A Bet
Any trade is a probabilistic event, whether you accept it or not. No trading system or signal provider can guarantee you 100% hit rate. This is due to the fact that market consists of unlimited participants whose actions are unknown to us. Technical Analysis can assist in providing educated guesses, but any trader, big enough, can shift the picture and cause us to lose.

Risk Constant Percent Per Trade
After we know that any signal provider – no matter how good – can lose, we will find it important to protect ourselves against such events, so we will be able to continue taking signal and recover.

This leads us to the basic and main rule of Money Managament: Risk Constant Percent Per Trade. On each trade you should risk a constant amount of your equity, between 1% and 3%. This ensures that you withstand long periods of losses and stay capable to enter at the next winning signals.

Stop Loss and Money Management
A newbie mistake is manipulating Stop Loss to fit one’s equity at risk. This is a wrong approach. Stop Loss should be related to chart only and to Support and Resistance. Modifying it due to risk-management can cause early exit with small profits and larger losses. One must modify his lot size to account for money management, leaving his Stop Loss intact in its logical place.

This approach to money management is an irreplaceable part of trading and is of high importance to trading success. These rules can assist you in trade trading signals with higher success and better yield.

Forex Trading Signals & Auto-Trading – Intelli4x.com

Trend Follower vs. Contrarian
By looking in past trades of a trading signal provider (be sure to do so), we could learn whether the provider is trading with the trend or catching reversal points.

Trend-Following are often late entries, entered after a trade was already established at the FOREX pair. They are usually the result of a Moving Average cross, simple indicator alert or a Breakout strategy.

Example of Trend-Following Entries

On the other hand, contrarian entries are entries that attempt to catch an exact turning point of price. They usually occur at the very beginning of a new trend, hoping to catch the entire move for more profits.

Example of Contrarian Entries

Which Is Better?
The trading style can give us important information about the experience and true performance of a signal provider.

While trend-following is a legitimate approach that can be profitable, it is usually better in trending markets and suffers great losses in range-bound markets. Trend-Following are also much easier trading systems to implement and imply less trading proficiency than a contrarian one. Moreover, when evaluating a signal provider, a trend-following can produce profits that are nothing but luck – simply because a trend was present at the exact trial period.

On the other hand, Contrarian strategies are much harder to implement and profit from, because great precision in entries is required. Catching an exact reversal point of price requires great trading experience and very few mechanical systems achieve this. Therefore, if a trading signal uses a contrarian strategy profitably, it indicates a much better profitability, and true trading proficiency of the traders.

Conclusion

Trend Following:

• Easier to implement.
• Indicates less technical proficiency.
• Can be profitable due to pure luck, and fail in the long term.

Contrarian:

• Harder to trade.
• Indicate great trading experience and abilities.
• High precision entries are demonstrated.

Be sure to check whether your signal provider is a Trend-Follower or a Contrarian. This can give you immense knowledge regarding its true profitability and performance.

Risk:Reward Ratio
Risk:Reward is an important concept in trading which represents the ratio between the potential loss in a trade and the potential profit. It is usually calculated by dividing the Take Profit size by Stop Loss size.

Risk:Reward in a Trade

This ratio is highly important, as it gives us an estimation of how big the profits are, in relation to the losses. The size of the number is very important in judging traders and signal providers, as it gives us valuable information about the quality of their trades.

Trade Quality and Risk:Reward
The relation between Risk:Reward and trade quality is simple: the greater the Risk:Reward ratio, the higher the trade quality. Great Risk:Reward indicates that the trader is very precise in his trade timing, and is able to risk a very small amount but take big profits.

I would consider Risk:Reward above 2 reasonable for trading, and above 3 to be very profitable. There are few trades whose Risk:Reward ratio is above 3 – and as many trades like this, the better the signal provider.

Be Careful of providers which take trades with extremely small Risk:Reward ratio (less than 0.5), and trades whose risk is greater than its profit. This indicates that these trades are highly risky, and eventually such trader is prone to losing. This strategy are used by many fraudulent providers. By risking a very big amount and taking small profits, such provider is able to withstand a period of 100% winnings, that may mislead customers to believe that it is a profitable service. Eventually, such services end up losing vast amounts of money.

Do not overlook the big picture
While great Risk:Reward is essential for trades, do not forget that the most important criteria is the bottom line: profits. If the trader is taking only trades with high Risk:Reward but is overall in loss, discard it as a service provider.

Conclusion
Risk:Reward ratio is a good tool to estimate the actual profitability of trading providers and trading systems, and give clients a clue on how really good the trades are. Next time you are evaluate a trading signal you will have a more clearer idea on its performance.