In the forex market, learning how to read forex signals is important. These signals work as indicators of how and when to act on particular currency pairs.
How Signals Work
If you ‘re new to the forex market, you could use all the help you can get. These signals are a solid way to up your trading game, but using signals isn’t a surefire way to earn a lot of money in the forex market.
These signals simply work as a way to analyze what a trader uses to determine whether to sell or buy currency. Signal systems can involve news-based events or they can be based on technical analysis charting.
For day traders, a trading signal system that consists of several different symbols can be used to help the trader to make the right decision based on the info they acquire. You can find these signals for a fee or free.
Automated and Manual Signals
These signal systems can be automatic or manual. The manual system option involves a trader monitoring a PC screen and searching for signals, interpreting whether to sell or buy. With an automatic system, such as the Wall Street Forex Robot, the trader must tell the software what signals to look for and how these signals should be interpreted.
The manual and automated programs can be purchased online. An investor can also obtain signals from forex brokers for around ten dollars a day. These signals can also be combined with fundamental analysis that’s designed to provide traders with an edge over other investors.
With high-beta stocks or in volatile conditions, using these signals can be simply invaluable. Not only when it comes to pointing out promising trades as they appear, but to also signal when these trades will disappear.
Minimizing Risk
Keep in mind that fraud can be a real issue when it comes to dealing with signals. The market tends to attract a wide variety of traders and investors and some signal providers can provide inferior or insufficient information at a high price. This information can damage or hinder your ability to make the right trade. Before you sign up with a signal service, make sure you research the company and do a little digging. You can join a forex trading forum and get feedback and suggestions from experienced investors. You may also benefit from programs such as Forex Trendy, which scans the markets for trends around the clock, alerting you to even the slightest change in market conditions. Programs such as these, combined with a solid signal provider, can give you the edge you need to make some serious cash in the forex market.
Testing Out a Service
Since there are so many signal services to choose from, we recommend signing up for a demo account, if possible. This will allow you to check out the features and what the service has to offer before you pay. You can check out the features in the member’s area, learn about notification options and choose text or email alerts, or both. Remember, this type of service is designed to make sure you don’t miss out on profitable trades and it can also help to improve your ability to track trades in general.
While these services have grown increasingly popular over the last couple of years, we strongly recommend verifying how trustworthy the system is, or you can end up throwing your money away. You should also keep in mind that not all systems are compatible with every time frame. Scalping is a common technique used in forex trading and it won’t work with signals because a signal will have closed by the time the trader has seen it. When you work with this kind of system you need to consider trades that offer longer time frames. This is where signal systems truly shine.
What Signal Service Providers Offer
If you decide to sign up for a service, most providers tend to offer the following:
- Signal analysis assistance, which includes supporting graphs
- Account management
- Training and education resources
- Free trial period in which you can try out the service for a few days in order to determine whether or not the program is right for you
- A dedicated forum that allows you to interact with other members
- Trading history
Common Types of Signals
There are several different types of signals out there, so understanding what each type means will go a long way as you learn how to navigate the forex market.
Below are some of the most common signals you’ll encounter:
- Action: This signal signifies a call to action in terms of buying and selling.
- Stop loss: This signal signifies an exit point and is used to help the trader to protect their investment. When automated, the stop loss signal pulls the investor out of a trade before a loss.
- Take profit: The take profit signal does the opposite of the stop loss signal and is triggered when profit levels have hit a set rate.
- Current market price: Not every signal is one that requires the trader to take action. In fact, some signals are simply a way to alert the trader to important information. The current market price signal helps the trader to compare prices of pairs at the time the trader submitted an order.
Using forex signals requires basic knowledge of forex. If you’re new to the forex market, click here to read our article on forex trading strategies for beginners.
When doing research, you’ll notice that there are a lot of signal providers out there, but if you don’t know what you’re doing or can’t fully comprehend the trading process, even the best signal service won’t be of much use to you.
If you’re a beginner, go with a service that provides feedback and data to back up their results. If possible, find a provider that offers a free trial period so you can get a feel for whether or not the service is a scam or legitimate.
