Trading signals make up part of every financial market, be it stocks, Forex, commodities, or cryptocurrencies. Also, some providers do not limit themselves to a single market. But what are trading signals? Trading signals represent a mix up of technical and fundamental analysis and charts. A trading signal stands for automatically or manually generated information related to the financial markets with the purpose to help traders and investors in making better decisions.
What is the Forex trading signal?
Forex signals indicate trading opportunities in the Forex market. The information provided can be gathered and distributed by human analysts or Forex robot automated tools. Forex signal services can be free or paid. It depends on your signal service provider, which can be a trading platform or an individual market analyst. As for any other market, the objective is to implement gathered information into your strategy to make the most out of your trades.
How to trade Forex using Forex signals
Using the Forex trading signal service is straightforward since you have to sign up with your trading provider and copy the information into your trading account. Still, different providers mean different quality of trading signals. Successful rates for every provider are different. Some go up to 70 percent, and some are much lower.
Forex signals generally bring you emotionless advice. Still, you as a trader must understand and recognize the major market events, conditions, and limitations before you take any action. Therefore, to perform the trades on your own, it is strongly advisable to take an online trading in-depth course and to do some trading on a demo account.
There are different types of Forex signals but here are the most important ones:
- Buy or sell – This is quite a straightforward type of signal that calls for the action to buy or sell a specific currency.
- Stop Loss – It represents the exit point for trade with the purpose to protect you from losing the money invested by pulling you out of the trade before losses take place.
- Take profit – This signal calls for the action opposite to Stop Loss. Once a profit level reaches a set rate a take profit signal activates.
- Current market price – There are signals that don’t call for a specific action. One of them is the current market price which is the piece of information about the currency price at the moment when the signal is issued and the moment of submission of the order.
Automated trading signals
Forex trading robots enabled automated signal trading. These robots are pieces of software, also popular as Expert Advisors (EAs). They have developed thanks to an endless amount of technical indicators. The software is created using the MetaQuotes programming Language v. 4.
The best Forex robots are using a tremendous amount of technical indicators and charts to find the best trading opportunities. These opportunities are communicated to the trader as a recommendation for taking appropriate trading decisions. They can also act independently, according to the available parameters and in that case, we are talking about automated trading. Usually, this type of trading is suitable for short term trades in a scalping strategy where profits amount only to a few pips.
The trading software market is enormous. You will stumble upon many providers offering you trading software packages to help you set up the best trading strategies. However, to benefit from this, you must have a basic understanding of average trading knowledge to familiarize yourself with market indicators and manage your money with minimal risks.
Manual trading signals
This is quite the opposite of automated Forex signal trading. Manual Forex signal providers comprise seasoned market analysts and individual trading professionals. These professionals generate signals using fundamental and technical analysis but also relying on their own experience, intuitions, and knowledge. They can use this knowledge to optimize their own trades or to provide signals to other traders.
Manual signal providers have different teams of analysts and trading experts at their disposal. They concentrate on a specific market such as stock indexes, cryptocurrencies, or specific currency pairs when it comes to Forex.
Individual traders usually provide the signals through social media network groups and Forex forums, but their credibility is often questionable. With the social trading brokers, you can visualize the performance of a trader and opt for the most successful ones.
The behaviour of the markets is ever-changing. Thus, there is no Forex signal service that can provide 100 percent accuracy, be it human or robot. As a trader, you should mix them both to optimize your profits.