There are many companies that offer trade signals, including trade signals for binary option traders.
Some companies offer a combination of free signals and signals that you have to pay for, while others only offer the one or the other. You can subscribe and have trade signals delivered directly to your mobile phone, or even connect the service to your trading account.
The signals are free, but using them can be costly
Getting something for free can feel very nice, but using trade signals simply because they are freely available can be costly. You are always putting your money at risk when you buy binary options, so you need to make sure the trade signals you use are of high quality.
A bad signal service will cost you money even if the signals themselves come for free, and a good signal service is worth paying for if the signals actually increase your profits beyond the cost of the service.
Are all free binary options trade signals low-quality?
No, free doesn´t have to mean bad. Some reputable signal service providers offer both free and paid trade signals. In a way, the free trade signals serves as a type of advertising for them, so it doesn´t make sense for them to give away bad and poorly researched trade signals.
With that said you should always do your due diligence before you trust any trade signal provider, regardless of whether the signals are free or paid for.
Are expensive signals always better?
Unfortunately, it is not that easy. Some businesses manage to charge a high price for their signals despite a mediocre success rate.
As mentioned above, a paid signal service is worth paying for only if it increases your profits by more than the cost of the service. Along the same route, it is not a good idea to ”save” money by using a free binary options signal service if that service actually decreases your profits.
Here is a little step-by-step guide that can help you as you are trying to determine if a certain signal service is worth utilizing.
Find out which success rate the signal provider claims to offer. (This will be historical success rate, of course. We can not see into the future.) If reliable 3rd party information is available, that is even better.
Find out the signal frequency, i.e. how many signals you will get per day.
How large return will your broker give you when a binary option (of the type you buy for your trading strategy) matures in the money?
Take a look at your own trading strategy. How much money will you be risking on each binary option? (When evaluating and using a signal service, it is recommended to risk the same amount on each trade.)
Now it is time to do some calculations.
We will calculate expected monthly value, using the following values:
Success rate 80%
5 signals per day, which equals 150 signals in a 30 day month
The broker pays 75% return when a binary option matures in the money.
You invest 25 USD in each trade.
You will get 150 trade signals in one month. 80% of them are successful, i.e. 120 of them are successful and 30 of them are not.
The 120 options that mature in the money will earn you 2250 USD, because $25 x 75% is $18.75 and $18.25 x 120 is $2250 in total.
The 30 options that mature outside the money will cost you 750 USD, because $25 x 30 = $750.
You earn $2250 and lose $750 in a month. The profit (before other costs) is $1500 per month.