You don’t have to spend much time on the web before you find offers for paid and free forex signals on Telegram. Many of them promise huge returns and thousands of free pips every month. But how useful actually are they? While there’s no doubt that forex signals can play a role in a currency trader’s strategy, many Telegram signals are not as promising as they may seem. In fact, in many cases, they are a perfect example of the expression “all that glitters is not gold”. Let’s take a look at some of the reasons why.
7 reasons why you should be wary of Telegram signals
1. They are actually scammers
We’ll start with what’s probably the biggest red flag. Some groups catch your interest with profitable Telegram signals in order to gain your trust and then steer you towards their main focus point: high-return cryptocurrency investments, usually Bitcoin.
They promise enormous profits within a day or two, often in the region of a 1000% return. Just send them $200, and after 24-72 hours, you’ll get $2,000 back, they say. They may even request thousands or even tens of thousands of dollars upfront, claiming that you will get your money back tenfold. These scammers often try to prove that they are credible at first by doing this with small amounts of money, e.g., you send them $1-$2 dollars, and they give you $10-$-20 in return.
Once they’ve received your funds, they then kick you out of the group and block you, with no intention of bringing you any profit or even returning your initial capital to you. Don’t fall into this trap.
2. Telegram signals and messages can be deleted
In Telegram, it’s possible to delete messages after they have been sent. This makes it extremely easy for a signal provider to remove any evidence of signals that failed. And this obviously leaves a message history full of glowing wins. Perhaps you join the channel, or perhaps you even set up your Telegram to MT4 signals copier to copy the channel. The end result is a disaster, and nothing like the previous message history suggested.
If you are interested in using a signal copier as part of your trading strategy, always test it on a demo account to confirm that it’s profitable before running it on a live account.
See also: TelegramFxCopier review.
3. The horrible risk-to-reward ratio of Telegram signals
Many inexperienced traders will see a stream of 20 or 50 pip wins in a Telegram group, and want to dive in straight away. Sure, there’s the occasional loss, but that’s no big deal right?
In fact, it’s a huge deal. That’s because wins on their own don’t mean much – you also have to consider the risk-to-reward ratio. As the name suggests, this ratio represents how much you stand to gain vs. how much you stand to lose per trade.
You can easily work out the RR of a trade for yourself. It’s the size of your take profit divided by the size of your stop loss. Each size is calculated from your entry point. So for example, a trade with a take profit of 60 pips and a stop loss of 20 pips has a risk-to-reward ratio of 3. That’s a good RR.
It’s very common that in many forex Telegram groups, the risk-to-reward ratio is really bad. An RR of less than 1 means that you are risking more than you stand to gain. For example, we found signals with a 90 pip stop loss and a 20 pip take profit. That’s an RR of 0.22, which is not remotely ideal. If the trade fails, you’ll need to win the next 5 trades in order to recover the loss.
We even found signals with an RR of 0.125. That’s really bad. Hitting a stop loss means you’ll have to win the next eight trades just to break even. And imagine having two losing trades in a row. You’d have to get sixteen straight wins in order to recover the loss.
While we’re on the subject, be sure to read our article on the awesome power of risk-to-reward ratio, and how it’s so important for keeping a trader profitable.
4. They obscure losses
This is a classic trick a signal provider often uses when they list their results. They will list the hitting of take profit points as individual wins. However, they will list the hitting of a stop loss only once.
This is highly disingenuous. If a signal carries multiple take profit points, then, generally speaking, this requires three separate trades. Obviously, this means that if the price reaches the stop loss, then this is not just a failure of one trade but a failure of three.
As a result, if the losing signal had a stop loss of 70 pips and a position was opened for each of the take profit points, then this is not just a loss of 70 pips, but a loss of 210. Ouch.
5. They fail to count pips correctly
This tactic goes hand in hand with the previous one. The pips from each winning trade from a good signal will all be added up, but the pips from the losing signal will only be counted once – as if only one position had been entered.
Other examples of poor pip counting include counting pips after the position closed by their own rules. For example, a trade hits its final profit point recommended by the signal provider, which was 80 pips from the entry price. However, the price continues to move another 80 pips in the same direction. This obviously would have been in the trader’s favor if the position was still open. The signal provider may count this as a 160 pip gain. But these extra 80 pips do not count, since the trade has already closed by the take profit point recommended by the trader.
The same goes for trades that hit their stop loss, only to then move in the right direction. A dishonest signal provider may count these trades and the pips from them as wins, even if the position was closed at the stop loss.
6. Some prop firms don’t allow them
Lots of prop firms have specific rules which forbid copy trading and the use of Telegram signals. Their reasoning is that they want good traders on their platform directly, and not traders who are simply copying good traders.
Most prop firms who forbid copy trading are usually working to spot it, so if you’re detected, it’s quite likely that your account(s) will be terminated. Before using forex signals with a prop firm, you should always check your contract and the firm’s general terms and conditions.
7. There’s nothing keeping you in the group
Most VIP forex signals groups typically charge an entrance fee to join. This could be a monthly or annual subscription, or it could be a one-off, lifetime payment.
The cost of these charges may run into hundreds of dollars. However, there is nothing stopping the admin from kicking you out and banning you from the group without any notice. Plus, if the signal provider does have written terms and conditions, it could be that they are in their rights to eject you from the group arbitrarily, without offering a refund. It could be that your place in the group is secured by nothing more than the signal provider’s goodwill.
However, there is one way to mitigate this point. Some Telegram signal groups don’t require you to pay any fees. Instead, they just require you to sign up with one of their affiliate brokers, usually with a minimum deposit. It could be that they receive a commission from successful trades. So in this case, they have a clear reason for keeping you in the group.