Not every trader is an expert, and many use various tools to help save time and assist in interpreting market information. Trading in the Forex market has huge potential for big profits. However, a well-researched and accurate strategy is a vital condition for success. Many traders think little about a strategy, jumping in with both feet and then losing huge sums of money. A more sensible option is to spend a few hours gaining an understanding of the dynamics of currency movements and basing trading decisions on what has been learnt.
Many traders have little time to spend watching the markets, and often don’t have the necessary skills to interpret the market information. This is where the tools come into play. Forex signals is one option that can save traders by providing timely and accurate indicators. They are an important trading tool that can help traders make profitable decisions. Signals provide raw data and insights into the market, which enable traders to pick the best trades, as well as minimizing risks.
What are Forex signals?
A Forex signal is either generated by a human analyst or an automated program such as a Forex robot. It suggests the time and price are right for entering a trade on a specific currency pair. The information will be very time sensitive so is usually communicated via SMS, email, RSS, Tweet, website or some other immediate method. In other words, it is a form of alert to keep traders updated about market fluctuations. Forex signals are available on subscription.
Forex signals services are becoming very popular, particularly amongst new or inexperienced Forex traders. However, they are also used by experienced traders who want to save time and formulate their own trading strategies. All a trader has to do is define the parameters of their risk and everything else is done by the Forex signals provider. There is no need to monitor the trading process either. But it’s worth mentioning that you will need to find the right one. As not all signals service providers are cut from the same cloth.
Different types of services
In general, signal services fall into one of four categories:
- Free or unpaid signals
- Paid signals provided by one provider, who either uses personal or algorithmic analysis
- Paid signals from a variety of sources or ‘systems’
- Signals provided by software, also known as a Forex robot or EA (Expert Advisor)
The services you can expect from a Forex signal provider
You’re probably thinking this kind of service sounds pretty helpful, but still not convinced this tool is right for you. So, let’s look at some of the features you can benefit from:
- One-on-one coaching – This could be via a forum, comments section or other form of interaction
- Account management – A subscriber’s account can be traded by the signal provider
- Training resources – Educational material available online or by phone
- Trading history – This will show the number of pips, either profit or loss, per month, risk/reward ratios, and real trades
- Infographics – This can include supporting graphs and analysis for the signals
- Entry, exit and stop loss figures – This can be exact or approximate, and for one or more currency pairs
Many Forex signals providers also offer a trial subscription at a lower price. These are the main features, but we should point out that not all providers offer the complete list of features.
How to get Forex signals
There are a number of different companies that specialize in Forex signals. Some will charge a few, and some will be free. What’s the difference? The paid services are thought to be more reliable, and accurate.
As well as service providers, there is also signal software available. The software has been programmed to analyze data and produce a signal. It’s a good idea to check out the authenticity of the software before buying by taking advantage of the demo or trial version.
How a Forex signal works
A large percentage of signal providers supply signals based on technical analysis. A small number of providers use fundamental analysis or price action. Ichimoku, and candlestick charting are two forms of technical analysis and both show short and long term price trends This allows the provider to be flexible in supplying a variety of trade options. Fundamental analysis is more of a long term thing, while price action gives short term trade ideas.
Choosing a Forex signal service provider
A vital part of using a Forex signal service provider is picking the right one. Pick the wrong signal and a trader stands to lose thousands of dollars. Providers should be chosen according to their reputation for reliability and authenticity. The MetaTrader 4 and MetaTrader 5 communities are renowned for reliability as all signals are made available only after strict scrutiny.
Forex trading is frequently touted as a get-rich-quick investment, but we feel it’s worth mentioning that there are a number of services who supply debatable, at the very least, quality signals. That fail to meet expectations of traders profits.