How to Know If a Trading Signal Is Legit
By Bruno Nalon · · 3 min read
A trading signal can be legit in two senses: it comes from an honest source, and the trade itself makes sense. A real company can send a bad signal, and a scammer can send a trade that happens to work. You need to check both - who is behind the signal, and whether the specific trade holds up.
Red flags in the source
Be very careful when the person or service behind a signal shows any of these:
1. Guaranteed returns, or claims like "never lose" and "risk-free".
2. Only winning trades shown, or screenshots instead of a full history.
3. Anonymous operators with no name, company or way to contact a real person.
4. Pressure: "only 3 spots left", "price goes up tonight", "act now".
5. Requests for your broker login, password or permission to trade your account for you.
6. Payment only in crypto or gift cards, or reluctance to give refunds.
One red flag is a reason to dig deeper. Several together are a reason to walk away.
Red flags in the signal itself
Even from a known source, the signal should hold up on its own. Warning signs include a stock that is tiny, thinly traded or suddenly promoted everywhere at once; an alert missing the strike, expiration or exit plan; no stated risk; and a story built on urgency or secret information instead of a reason you can check.
Pump-and-dump schemes rely on exactly these features: a small stock, an exciting story, and pressure to buy before you think. The people behind it buy first and sell into the demand they create.
Verify the trade before you place it
A legit options signal can be checked in a few minutes against your own broker:
| Check | How to do it | What a legit signal shows |
|---|---|---|
| The contracts exist | Find the strikes and expiration in your broker's option chain | Every leg matches a real, listed contract |
| The price is realistic | Compare the signal price with the live bid-ask mid | Within a few cents, or explained by time passed |
| Liquidity | Look at the bid-ask spread and open interest | Narrow spreads and active contracts |
| The risk math adds up | Calculate max profit, max loss and breakeven yourself | The numbers match what the signal says |
| Event risk | Check the next earnings date | No surprise earnings before expiration |
| It fits your account | Compare the max loss with your account size | A loss you can absorb without changing plans |
If the signal fails any of these, do not place it - however good the story sounds.
Verify the track record
A single good trade proves nothing. To judge a provider, look for a history that is complete, timestamped and checkable:
1. Every published trade is listed, including losses and trades closed early.
2. Each trade has entry and exit dates and prices, so you can confirm them against historical market data.
3. The record covers months, not weeks, and different market conditions.
4. The results are stated after losses, not just as a win rate.
Then confirm it yourself: follow the next signals live, on paper or with very small size, and compare your results with what the service reports.
Check who is behind it
Look for a named person or company you can research, a real way to contact them, and public terms of service. In the US, anyone claiming to be a registered investment adviser or broker can be looked up on the SEC's Investment Adviser Public Disclosure site and FINRA BrokerCheck; other countries have their own regulators.
Educational signal services usually are not registered advisers and should say so clearly. That is fine - the warning sign is a service that claims credentials it cannot show, or one that offers to manage your money.
Protect your broker account
A legit service never needs your broker password. If a service places or sends trades for you, it should use the broker's official connection method, let you revoke access at any time, and still ask you to confirm each order.
EasyTrade is built that way: every signal is published with its rationale, EasyScore, max risk and max profit, results include losses, and the founder is named. Diamond users can send signals to a linked tastytrade account, confirm every signal they send, and unlink the account whenever they want.
See a real signal for yourself
Every EasyTrade signal shows the max risk, max profit, EasyScore and a step-by-step execution guide before you trade. Try it free for 30 days - no credit card required.
Frequently asked questions
Keep reading
- How to Avoid Scam Trading Alert Services
- How Accurate Are Trading Alert Services?
- What Should a Good Trading Alert Include?
- Why Do Trading Alert Services Fail?
- Options strategy guides