What I think of trading signals: Useful tools or dangerous shortcuts?

Are trading signals the ultimate shortcut to success, or a risky crutch holding you back? In this deep dive, trading expert Tomislav Kamenecki explores how trading signals can either sharpen your strategy or sabotage your growth, depending on how you use them.

For many new traders, getting started can feel overwhelming. The charts look confusing, the terminology sounds strange, and everything seems complicated. The pressure to make the right decisions right away is very real, which is why so many traders turn to trading signals.

At one point, in search of my trading holy grail, I fell into the trap of looking for easy solutions. Trading signals promised a shortcut to consistent profit. Everything I needed was supposedly at my fingertips, just follow someone else’s instructions: buy here, sell there, place a stop-loss, and wait for your account to grow. Your new car is already in the garage, right?

The reality? Disappointing. Out of ten signals, maybe one worked. I didn’t trust them blindly! I tested them on a demo trading account first. The results were clear: blindly following trading signals is a recipe for disaster and a fast track to an empty trading account.

Many traders turn to signals to build confidence. Some don’t have the time to commit to full-time trading. Some are greedy; seeing screenshots of massive profits from signal providers triggers FOMO (Fear of Missing Out), and they dive in without fully understanding what they are doing.

Eventually, I realised there are no shortcuts in trading. You have to learn how the markets work and then adapt. Signals can help, but only if you know how to use them properly. While they may seem helpful, they also come with risks, especially when used without understanding the strategy behind them.

What are trading signals?

Trading signals are alerts that suggest when to enter or exit a trade. They typically include the asset, direction (buy or sell), entry price, stop loss, and take profit levels.

They can be especially tempting in CFD trading, where traders speculate on price movements in fast-moving, volatile markets.

There are different types of trading signals:

• Manual signals: Created by human analysts based on price action, chart patterns, news, or sentiment.
• Automated signals: Generated by algorithms or trading bots based on programmed rules.
• Technical signals: Based on indicators, price action, and chart analysis.
• Fundamental signals: Based on economic news, earnings, or macroeconomic events.

Common sources include professional signal providers, trading platforms, brokers, social media channels like Discord or Telegram, apps, and online forums.

The pros of trading signals

Trading signals offer several advantages that appeal to traders of all experience levels. By leveraging expert insights, signals can enhance decision-making, reduce emotional bias, and provide valuable learning opportunities.

1. Time-saving and efficiency

Signals can save a lot of time. Instead of analysing charts all day, traders can focus on specific opportunities. Signals streamline the decision-making process for those with limited time, especially part-time traders. Automated signals can be even more convenient, reacting to real-time market conditions and providing alerts instantly.

2. Access to expert analysis

Following trading signals can offer a form of indirect mentoring. When signal providers explain their reasoning and share charts, you learn how they interpret market conditions, which technical indicators they trust, and how they manage risk. Signals from experienced traders or algorithms can also introduce you to new strategies and trading ideas you might not have discovered.

3. Reducing emotional trading

Trading signals introduce structure and discipline, helping traders avoid impulsive and emotionally driven trading decisions. Instead of relying on gut feelings, traders follow predefined rules. This reduces stress, promotes objectivity, and supports consistency, especially in volatile markets. Well-structured signals can act like a compass, guiding you through periods of uncertainty.

4. Suitable for beginners

Signals offer a structured entry point into trading for new traders. They can shorten the learning curve and provide a foundation for understanding market dynamics. By studying the logic behind each signal, new traders can build confidence, develop practical skills like chart reading and risk management, and make more informed trading decisions.

The cons of trading signals

While trading signals can offer valuable support, they also come with several significant drawbacks. Relying too heavily on them without developing your skills can lead to bad habits, extreme risks, and disappointing results. 

Here are some key limitations I’ve learned to watch out for.

1. Dependence on external sources

The biggest risk is becoming dependent on trading signals without understanding the reason behind each trade. This creates passive behaviour, where trades are followed blindly. The trader has no solution if the provider disappears or the strategy fails.

Even worse, relying too much on signals blocks trading skill development. Real trading success comes from experience, reflection, and the ability to make decisions based on your market analysis.

2. Signal quality can vary

Not all signals are created equal. Some are produced by experienced analysts or tested algorithms, but others come from unverified sources looking to profit from beginners.

Low-quality signals often lack proper risk management, provide vague instructions, or are designed to benefit the provider more than the user. This can lead to poor trades, emotional reactions, and financial loss.

Tip: Always verify a provider’s track record and test their trading signals in a demo account before using real money.

3. Cost and hidden fees

Many signal services charge subscription fees, ranging from reasonable to extremely high. While a few might offer good value, others give little in return. Hidden costs can also include wider spreads, broker commissions, or upsells to expensive "must-have" trading tools. Often, the biggest cost isn’t the subscription—it’s the poor decisions that follow and an empty account.

4. No guarantee of success

No matter how confident or professional a signal provider seems, earning a profit from trading is not guaranteed. Even strong strategies can fail due to unexpected news, shifts in market sentiment, or changing volatility.

That’s why proper risk management is critical. Use stop losses, manage your position size, and understand that losses are part of the process. Trading signals should never replace a solid plan, and each trader must take personal responsibility for every trade.

5. The myth of the “100% win rate”

Magical signal providers who claim to never lose are especially appealing. They say they’ve beaten the brokers and financial markets and are now offering to sell their secret for 19.99 USD a month. Sounds too good to be true? That’s because it is.

If I had a system that was profitable 100% of the time, I wouldn’t be selling signals—I’d be managing a billion-dollar hedge fund from a private island, and Warren Buffett would be my client. In trading, losses are unavoidable. Anyone promising guaranteed profits is selling a fantasy, not a strategy.

Understanding the risks and limitations of trading signals is just as important as recognizing their benefits. Used carelessly, they can cause more harm than good. Approach signals with a critical mind and a well-prepared trading plan.

4 tips on how to use trading signals effectively

1. Do your own research

Treat signals as a starting point, and always check the logic behind a trade by comparing it with your analysis. Ask yourself:

• Does the signal align with the market trend?
• Are there any major news events coming up?
• Does this signal match my strategy?
• Is the risk level acceptable?

These extra steps can drastically improve your trade quality and confidence.

2. Choose reliable sources

Evaluate signal providers carefully. Look for:

• Transparency in how signals are generated.
• A track record of results (including losses).
• Clear risk management rules.
• Explanations that help you learn.

Tip: Avoid signal providers who refuse to show real trading history and past performance.

3. Combine signals with your own strategy

Signals work best when they complement your strategy. Don’t follow signals blindly; adjust them to match your goals, style, and risk tolerance.

For example, if you’re a swing trader, skip signals meant for scalping. If you’re risk-averse, use wider stop losses than suggested. Make sure each signal fits your approach.

4. Manage risk properly

Even the best signal can lead to a loss. Always:

• Use a stop loss.
• Apply a realistic risk-reward ratio.
• Avoid overleveraging.
• Risk only a small percentage of your capital per trade.

Tip: Remember that even great signals can not replace education, emotional control, and consistent practice.

A smarter way to use professional analysis

At Exness, new traders have access to high-quality technical analysis and analytical tools through our partnership with Trading Central—one of the most trusted names in market research. These expert insights cover various instruments and are updated every two hours, keeping traders aligned with current conditions.

What I like is that it’s not just a copy-paste solution. The analyses include clear visuals, potential entry points, stop loss levels, and price targets, making it easier to understand the logic behind each recommendation. This is one of the most effective ways I’ve found to combine expert input with personal learning.

Exness saves time and reduces guesswork, especially for busy traders. It helps you stay informed while building your skills—something that signal services rarely offer.

Common questions about trading signals

Are paid signals better than free ones?

Not always. Some free signals backed by solid data and shared by reputable sources can be just as effective as paid ones. Others, even if expensive, may lack a reliable track record or fail to align with your goals. Whether free or paid, always assess how signals fit your strategy. Look for clear logic, take profit and stop loss levels, and transparent communication. Use a demo trading account to test before committing real funds.

How do I know if a trading signal provider is trustworthy?

A trustworthy provider will show a proven track record, explain their approach clearly, and back it up with data and technical analysis. They should outline risk management strategies, define entry/exit points, and explain how they interpret market opportunities. Avoid anyone promising guaranteed wins. Do your research and test signals in a demo account before making live trades on your trading platform.

What kind of trader benefits most from using trading signals?

Signals can be especially useful for new traders looking to start trading with guidance or for part-timers who lack the time for full-time analysis. When used correctly, they provide valuable insights and highlight potential opportunities in the market. However, they are most effective when you apply them alongside your own analysis. With time, experience, and a clear trading strategy, traders learn to adapt signals to suit different markets and conditions.

Should I follow every signal I receive?

Definitely not. Every signal should be weighed against your trading strategy, risk tolerance, and your read on the markets. A good trader doesn’t follow signals blindly but assesses whether the trade fits current market trends and personal goals. Always apply thorough research and critical thinking. Test on a demo or smaller trading account, and use signals to refine your understanding, not to outsource your decision-making.

Key takeaways

1. Trading signals are tools—not shortcuts—to success. While they may highlight market opportunities, blindly relying on them without understanding the logic can quickly drain your account.
2. You must build your own market analysis skills. No matter how strong a forex signals provider claims to be, using signals without developing market analysis ability is a risky strategy that stalls your growth.
3. Quality varies dramatically across signal providers. Some use real fundamental analysis and technical analysis, while others push vague or untested trade ideas that are more harmful than helpful.
4. Always verify the track record before trusting signals. Look for a proven track record, clear strategies, and data-backed results before applying signals to your live trading account.
5. Signals should align with your trading strategy. Evaluate whether a signal fits your style and timeframe. One size doesn’t fit all, especially across different markets like stocks, crypto, or forex.
6. Don’t neglect risk management. Even with a strong signal, you must set a stop loss and a realistic take profit to protect your account from market volatility.
7. Understanding chart patterns helps you validate signals. When you recognize setups like breakouts or reversals, you can judge if the signal makes sense based on current market trends. Use a demo trading account to test first. Before you start trading with real capital, experiment with signals in a risk-free environment to evaluate how they perform in real markets.
8. Fundamental analysis still matters. Watch economic indicators and news events that can override even the best signal logic, especially in fast-moving markets like forex.
9. Use signals as a complement, not a crutch. Smart forex traders combine signals with their own insights, research, and tools, ensuring that signals enhance rather than dictate their decisions.

My final thoughts on trading signals

Trading signals can support your journey, especially when the markets initially feel overwhelming. They can save time, offer fresh perspectives, and highlight opportunities you might not notice yourself.

But let’s not kid ourselves: they’re not a magic solution. If you rely on signals without understanding the reasoning, you’re not trading—you’re just following. And that rarely ends well.

In trading, as in life, if you always depend on others to make decisions for you, you’ll never feel truly in control. The most successful traders I’ve met are the ones who take responsibility, stay curious, and trust their judgment.

Use signals as a tool, not a final destination. Study them. Question them. Adapt them to your style. And most of all, keep learning. 

In the end, trading isn’t about copying someone else’s moves. It’s about understanding the markets and learning how to navigate them your way.