If you are forex trader, you would have had to take quick decisions regarding,
“Which currency pair should I trade in?”
or “Should I buy or sell currency?”
This was a complicated task some years ago. But, thanks to technology forex trading has been greatly simplified! Traders can just subscribe to forex trading signal providers who will send them signals regarding when to buy or sell!
Forex trading entails frequent buying and selling of currencies several times a day. And, this can be quite complicated and tedious. This is because you need to learn the nuances of trading and ensure that you are alert continuously to make buying/selling decisions.
Forex trading signals aid traders across the globe to take decisions regarding their trades. A forex trading signal could be a recommendation by a human analyst or a software or an automated signal provided by a robot. Forex signals run in real time providing critical information regarding entering a concrete trade on a specific currency pair. It also indicates the time and the price for entering the trade. Usually, forex signals are notified using SMS, Twitter feeds, websites, RSS, or email.
Forex signals enable a trader to open a forex trade based on the signals.
Some of these signals are:
Currency pair: It indicates the currency pair to trade in
Open Date: The favorable date for opening the trade.
Position: Whether to buy (long) or sell (short)
Open Price: The best price to open the trade
Stop loss: The stop loss level is set if the trade goes in an unfavorable direction.
Target: The estimated target profit level at which the profits should be secured by closing the trade.
A forex signal is generated based on:
1. Technical analysis of the market that includes past trends and prices
In technical analysis, the analyst studies the historical price movements and chart patterns. Based on this, the analyst predicts the signal in a case similar patterns present themselves. Analysts can study the historical data and make predictions themselves or they can use robots for making predictions.
2. Fundamental Analysis - Short and long-term impact of current events on the prices
Economic events, company announcements, and market news affect the price movements of financial instruments. An individual needs to keep himself updated with the upcoming events so that they can take the required decisions at the right time.
Most traders find it difficult to conduct the technical and fundamental analysis to make trading decisions. Forex trading signals serve as essential indicators to monitor the market. These signals are available to traders in real time so that they can act instantly without wasting time on analysis. This also helps the trader capture more profitable trades to grow his account.
There are certain tools used for generating forex signals:
- Camarilla Calculator
- Pivot Points
- Technical indicators
- Forex News
- Economic Calendars
- Candlestick Charts
1. Manual Signals
These signals are generated by a human analyst. He studies the market and searches for signals regarding buying or selling currency.
The benefits of this method, when compared to the automated signal, is that in an unpredictable market scenario, the analyst is able to apply his experience and judgment to take a decision regarding purchasing or selling.
On the flip side, this method is vulnerable to inaccuracies and is time-consuming as it is based on human analysis. It requires the analyst to spend long hours in front of the computer to generate a signal.
2. Automated Signals
An automated forex signal is generated by a robot based on a pre-programmed software. The human only needs to give a command to generate the signal. This completely eliminates the stress on humans for searching for the signals. Besides, robots generate quite accurate results.
Other benefits of automated signals include:
- The robots can process large volumes of data and so can provide you signals on multiple currencies at the same time.
- The signals are provided round the clock, enabling you to take decisions as per your convenience.
- They also eliminate the psychological element which is a part of the human analysis.
- Although automated forex signals are quite accurate, they cannot completely eliminate human intervention. The best way to take a decision for forex trading is to use signals from both humans and robots.
This leads us to the question, “How to get forex trading signals?”
Forex trading signals can be purchased from sources online. There are a number of websites offering online forex trading signals. However, many sites are inaccurate and do not provide reliable information. Hence, it is important to choose a website for purchasing a forex signal cautiously. In fact, there are some websites that offer a free trial where you can test the quality of the signal prior to making a purchase.
Forex trading entails high risk, therefore you need to become a trader bearing certain aspects in mind:
- You should be aware of your risk tolerance level and choose a forex signal provider who will provide you signals based on your risk profile.
- Also, it is important for you to indicate to your signal provider about the markets that you are familiar with and interested in.
- Although the field of forex trading signals is fairly recent, ensure that you choose a service provider who is experienced.
- In case you are looking for trading advice, choose a service provider who closes the signal when the time comes to exit the trade.
- You can check the reviews of various forex trading signal providers and choose one with a good reputation and proven results.
When you are looking for a forex trading signal service, you will need to choose the type of service you require.
Types of services available are:
- Free forex trading signal
- Paid signals provided by one source which could be based on human analysis or algorithmic analysis.
- Forex signals generated by multiple sources and aggregated. These signals are also paid signals.
- It could be through a forex robot which is a trading software on the trader’s computer.
- What features to look for in a forex service provider?
- Entry/exit and stop loss data for trading on one or more currency pairs.
- Graphs and analysis supporting the signal.
- The trading history that includes data on profit/loss per month, risk/reward ratio, and actual trades.
- A good forex signal provider offers one-on-one coaching through chats or forums, etc.
- Very often signal providers even manage the trading of the subscriber’s account. You need to be sure whether you want the facility of account management from your service provider or not.
What service does a Forex trading signal provider offer?
When you choose a forex trading signal provider, he will send you signals through emails, text message, etc. This will enable you to track your trades and ensure that you do not miss any opportunity to buy/sell currency.
The forex signal providers send buy/sell signals to their subscribers.
When a forex signal provider determines that the price is going to rise, he sends the “buy” signal to the subscriber. This is signal is sent for the currency pair the subscriber is familiar with and he is notified when and where to place the trade.
A forex signal provider sends a sell signal to a subscriber after analyzing a forex chart completely and ensuring that the price is going to fall. The subscriber is notified as to when and where to sell.
How does Forex trading software help a trader?
Forex trading takes place between Monday and Friday. A good forex signal provider offers tutorials that can be used to improve the knowledge of trading. The signal provider will send a few alerts during the week to the subscriber leaving him sufficient time to understand the market and the software. With the consistent use of software services, the subscriber becomes conversant with the terminologies and processes and is able to leverage the trading signals successfully.
When you receive an alert, you need to enter the orders accurately according to the message received. This will enable you to know exactly when to open a buy or put a stop loss. This helps you trade safely and avoid losses.
Your choice of forex trading signals unfolds numerous possibilities to you. The software updates you throughout the process guiding you about what you should be doing at each stage. You can alter your actions such as exiting the position or placing a stop loss, etc. depending on what you are trading on.
The Bottom line
The objective of forex trading signals is to guide a trader on when and where to place his money. This simplifies trading even for a layman. Forex trading signals are becoming increasingly popular because of the convenience of use. If the alerts and recommendations provided are followed judiciously, they help a trader make profits. Forex trading signals have reduced the efforts and complications associated with trading.
