CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of Pepperstone Limited’s retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Risk Warning.

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MT4 Signals: A Useful Diversification and Education Tool

“The stock market is a device for transferring money from the impatient to the patient” – Warren Buffet.

Let’s face it: sitting tight and remaining flat for extended periods of time can be difficult for many traders. For some reason, it doesn’t feel like you’re dedicated enough to the work to become consistent in the markets. 

However, there are times when your trading strategy requires you to stay flat. During these times, trading signals can be a handy tool to diversify your personal portfolio. When you are flat, a different model might be at work, grinding out the pips. What’s more is that you can visualise the trades on your platform; this is also useful as an educational tool.

Trading signals can be useful for diversifying your portfolio and gaining more insight into how various trading models work.

Introducing MT4 Signals

For this purpose, MT4 provides a built-in Trading Signals tab within the Navigator box. This offers traders easy and immediate access to the signals and signal providers.

Pepperstone MT4 with Signal tab magnified.
Pepperstone MT4 with Signal tab magnified.

All you need to do is choose a signal provider and subscribe to the signals. After that, all trading signals will be automatically copied onto your trading account. It is truly simple and convenient: everything is done with a few clicks of the mouse.

MT4 signal providers share their signals within the MT4 global community, which has millions of users, and if anyone chooses to follow them, they can earn a fee.

MQL 5 global community site where signal providers attain visibility for their models.
MQL 5 global community site where signal providers attain visibility for their models.

The Benefits of MT4 Signals

Trading signals have various benefits to the Forex trader:

  • Diversify away from your primary strategy: Trend trading strategies, for example, require trends in order to exploit their edge. When the market is not trending, instead of staying flat, traders can rely on signal providers for activity.
  • Diversify your portfolio: Why stop with one signal provider? By employing signal providers that have different approaches, you can potentially follow one of Ray Dalio’s principles, which is “seek to obtain multiple non-correlated strategies” that can reduce your overall portfolio risk. 
  • Manage your time better: By using trading signals, you can effectively allocate your time better and not have to constantly monitor charts. You let the provider do the work for you, allowing you more free time.
  • Save money: Fees are very low (and sometimes free) for MT4 signals.
  • No paperwork required.
  • Maintain control of your account: You maintain total control of your account and can intervene in any moment to close trades, change capital allocation to a strategy, change the stop-loss inserted, or remove the strategy.

Registering for MT4 Signals

Registering for MT4 signals is quite easy.

Step 1: Register on the MQL5 website, clicking on Register in the top right hand corner. Your password will be emailed to you and will be required for step 2.

Step 1: Register on the MQL5 website

Step 2: Once you have your registration details, go back to your MT4 platform and login. You can reach this login box from Tools  Options  Community Tab. Insert your credentials received in Step 1.

Step 2: Login

Step 3: Go back to the Signals Tab in your Navigator window and select the signal provider(s) you wish to activate on your account.

Step 3: Signals Tab

Step 4: Click on Subscribe and you will be prompted to enter your MQL5 password once more, and agree to the terms and conditions.

Step 4: Click on Subscribe

Step 5:  You will then be taken to a risk management display, where you can allocate a percentage of your account to the signal you are subscribing to. You can also insert a stop loss on the account to protect you, in case the strategy does not perform well. Insert your parameters and click OK.

The signal is now active on your account.

The signal is now active on your account

How to Select a Signal Provider

You are by no means limited to the signals that first appear on your MT4 platform under the Signals tab. If you log into your MQL5 community account, you can also visualise a whole series of other signal providers (premium and free), divided into MT4 or MT5 based on the platform being used.

MT4 Signals’s portal within the MQL5 Community
MT4 Signals’s portal within the MQL5 Community

When selecting a signal provider, there are a few aspects to consider:

  1. Do not be blinded by the overall percentage return. Some strategies might show high returns, but there are several considerations to keep in mind:
    - The signal provider might be trading on a demo account.
    - The signal provider might be using high leverage to obtain these results.
    - There might be a discrepancy between the actual consolidated equity (based on closed trades) and the open trade equity (which includes open positions). If the signal provider is holding onto losses and only closing profitable trades, you may want to question the longevity of the program.
  2. Select providers using real accounts, not demo accounts.
  3. Select providers that have performed consistently for a number of years, and avoid providers that have a limited track record.
  4. Select providers that manage risks well. Generally, it’s better to have smaller, consistent returns, rather than higher, but more volatile returns. Rapid and volatile growth usually suggests a misuse of leverage.
  5. Be prepared to pay for the privilege. Good signal providers will require compensation for their efforts, but in most cases the fee is minimal compared to the benefits.
  6. Evaluate the equity curve. Real traders will have “realistic” equity curves with ups and downs. Look for a solid curve, with low volatility. For example, the chart below illustrates a decent looking equity curve. The trader remains flat for some period of time, until his edge becomes apparent in the markets.

Equity Curve

Now, compare that to the following equity curve. Evidently, this system has achieved all its gains in the past, and is struggling to make headway.

Equity Curve

And finally, here is a system that although is showing a positive result, is actually volatile and unstable. You might want to avoid equity curves that look like this or worse.

Equity Curve

Over to You

MT4 signals can be a useful tool for traders who are looking to diversify with a variety of strategies. You can avoid needing to execute trades yourself, and instead only manage your signals. However, MT4 signals are also an excellent tool for traders that have a successful strategy and just want to diversify away from their principal strategy. To access MT4 signals, simply open a live or demo account with Pepperstone.

 

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The information provided here has been produced by a third party and does not reflect the opinion of Pepperstone. Pepperstone has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and therefore should not be relied upon as such. The Information is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. We advise any readers of this content to seek their own advice. Reproduction or redistribution of this information is not permitted.