1- Account Size
The first thing you should be on the lookout for is signal providers with small accounts. It goes without saying that someone trying to provide trading signals with a $500 account lacks credibility.
You have to keep in mind that a long string of winners on a small account can make it seem like there was huge growth (percentage wise). For example, a $10 win would result in a 2% growth on a $500 account. That $10 can be achieved by scalping a pip with a position size of a lot.
Now, imagine that, once a week, a signal provider with a $300 account scalped a pip for 52 weeks in a row. That would bring their account to an uncompounded growth of about 100%. Most people would be very satisfied with this kind of results, yet they could probably achieve such a feat themselves with a little bit of luck.
I recommend that you prioritize signal providers with a reasonable account size (I would consider at least $1000 to be reasonable).
The rarest and most important quality in a signal provider is consistency. Since you are not in control of the decisions, a big fluctuation in performance will start making you think that your provider has ran out of luck, or maybe they’re having a mental breakdown. Point is, any provider who wishes to keep their subscribers should focus on consistency over high but volatile returns.
Such obvious inconsistencies usually represent that the trader is in a bad state of mind and is not simply having “bad luck”. Of course, no trader is safe from bad trades, but they shouldn’t be as systematic as the pullbacks in the example above.
In this second example, you can immediately see that the growth is almost on par with its average. This can be associated with good risk management and high probability setups.
Keep in mind that the bottom row of the chart represents the number of trades, meaning that the drawdowns cannot be associated to “one big loss”. It represents a string of losers that lasted for as many trades as the chart is displaying.
Best and worst trades: Depending on their winning trade %, it is important that your signal provider doesn’t let their losers get out of hand too much. If they do, you should verify how long they let their best winning trades run. If they have a habit of letting their losers run for long and cut their winners short, that’s a bad sign.
Maximum consecutive wins and maximum consecutive losses: Although some traders appear to have long streaks of winning trades, that number can possibly be inflated by a split position (for example, instead of entering a position of 0.10 lot, the signal provider would enter 10 positions of 0.01 lot to scale the profits). These 10 different positions would count as 10 winners if they all hit their profit target. You should verify how to trader splits their position in the “Trading history”.
You should also verify what kind of gain or loss these consecutive trades brought. If the trader gains $300 with their 100 winners in a row but loses $400 with their 6 consecutives losing trades, maybe this statistic should be taken with a grain of salt and does not represent the competence of the trader.
Winning Percentage and Average Profits/Loss: This is one of the most important statistics. How often do they win, and what is their risk/profit ratio. In this example, the trader has a 87.50% winning rate and a 2:1 risk/profit ratio, which is good. They would need a winning rate of a bit over 66% to break even.
Trades per week: The more they trade, the less likely they are to have long term drawdowns. In this case, 87.50% winning rate combined with 8 trades being taken every week can tell you that their drawdowns are going to be short lived; the growth curve of this trader is the second example I provided.
Another important number is account age. You can see this at the top of the portfolio page, showed in weeks. This is important because short term account – no matter how good the other statistic can be – could gain all that by pure luck via several good trades. On the other hand, maintaining steady profit for 12 weeks or more will need solid consistency from the trader’s part.