With the number of people spruiking ‘Free’ Telegram groups these days and personally knowing a number of people that have churned and burned through them I thought I would take a couple minutes to hopefully educate some newbies to the Forex industry and hopefully save them a couple of $$$ in the long run…
Free Telegram groups/signals… To someone who is new to forex trading these seem like a great way to get entry and exit signals from an ‘expert’ - for FREE!
BUT like most things in life, especially with the forex industry, you need to ask yourself what is the benefit to the counterparty?
To understand how the person providing free signals is making money you need to understand that the majority of forex traders fail, yes the majority of retail traders that come into the forex world end up blowing their account and quitting or running out of money. Now this alone is a big issue for all the brokerage companies out there as if they don’t get new sign ups, depositing money into their brokerage and making trades, they would quickly go out of business!
To combat this, nearly every brokerage will offer either upfront payments or ongoing commissions to anyone that brings in new business in the form of signups.
But just signing up to a brokerage isn’t enough. As the brokerage makes the bulk of it’s money on the spread every time a client takes a trade. So what the brokerage really needs is new clients signing up AND processing a large volume of trades. The more clients placing large trades = more revenue for the brokerage firm.
This is where marketers and enterprising individuals come in with their free signal groups… As these appeal to most who are new in the industry, chances are you will follow the signal groups recommendation of which broker to sign up to, with some not even giving you a choice! This is all then linked through the broker to the signal provider who not only will get paid just for you signing up and depositing money, but will also receive ongoing payment for every trade you place.
This dynamic means that it is not in the signal providers interest for you to learn how to trade, manage risk or even make money, their motives lie purely with getting you to trade as big as you can, as often as you can, while they get paid handsomely from the broker.
Now I am not saying all signal groups are bad, and hey if they are free then they have to get paid for their time somehow. This is more just about educating those new to the industry who may not be aware that their are some signal groups out there with hidden financial motives. So always approach them with a level of cautious skepticism.
Hopefully this helps a couple of you.
Happy Trading,
Nathan
