What are Forex Trading Signals - Forex Signals Explained


Whether you are a beginner or an expert trading signals are always useful in Forex. They serve to save time and increase the likelihood that trading will be profitable.

They also allow you to take advantage of the wisdom of other traders to improve your skills and discover new strategies. Unfortunately, not all signals are reliable so it is best to learn to distinguish a good signal from a weak one.

Whether you are a beginner or an expert trading signals are always useful in Forex. They serve to save time and increase the likelihood that trading will be profitable.

They also allow you to take advantage of the wisdom of other traders to improve your skills and discover new strategies. Unfortunately, not all signals are reliable so it is best to learn to distinguish a good signal from a weak one.

Forex signals explained

What are forex signals? Forex trading signals are information, coming from different sources, useful to understand the most opportune moment to buy or sell on the currency market in a profitable way. Entry signals if they indicate when and what to buy, exit signals, if they propose, what, and when to sell.

The Forex trading signals are recommendations from professional traders, analysts, and companies, and can be free or paid.

 The best recommendations include the reasons for the signal and thus also allow you to discover the strategy or method used to obtain it. All very useful information to enhance your experience.

Why take advantage of Forex signals

There are many reasons why it is good to include signals in your strategy and not rely only on your own decisions.

  • Expert opinion. If you are a professional trader you can use the signals to confirm your opinion; which is great for saving time and effort. If, on the other hand, you are a beginner, the advice of an expert will surely only increase your chances of success.
  • Formative opportunity. It doesn't matter if you are just getting started or if you are doing Forex trading for years, there have always been new strategies or techniques to learn
  • Save time. It is often not easy to recognize what is the best time to enter the market and certainly, you have to invest some time to find out. Better to take advantage of the signals and save time by investing in other things.

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What forex trading signals include

Each recommendation is characterized by some fundamental information, let's see them:

  •  Entry point. As we have already said, all Forex signals indicate the price at which to enter the market, therefore how much to open the position. Normally professional signals are given in advance and you will hardly see any signs telling you to open a position immediately. In fact, these signals could be read late. Any unclear indication certainly increases the likelihood of losing money.
  • Take profit. It is not enough to open the position at the right time, it is also necessary to know when to close it successfully. This is why all trading signals indicate take profit. If the trade is the subject of careful study, it often specifies even more than one take profit depending on the trader's risk appetite.
  • Stop loss. No matter how good you are, there is always a risk of losing your money. Even successful investors like Warren Buffett and George Soros can make mistakes or suffer the effects of unexpected events. To limit losses, all Forex signals specify a good price for a stop loss. If the market doesn't respond as it should, you will be protected against most losses.
  • Buy or sell. All signals specify whether to buy or sell the instrument. Some may have both indications based on conditions, which means that the current situation is not very clear. In any case, all signals must meet specific conditions in order to function.
  • Additional information. Usually, traders and analysts explain the reasons behind their signals. Among the various data combined with the signal, we find specific trends, formations with candles, or indicators. A chart may also be included.

Types of forex signals

There are various types of signals, but let's start with the main classification. Based on the type of analysis performed, the signals are divided into two categories: fundamental and technical. However, the most reliable signals are based on both fundamental and technical analysis.

Signals based on fundamental analysis

Fundamental analysis draws on news and economic data. Analysts interpret various economic, political or company-related news to provide their opinion. So this type of signal is effective just before particular market events.

An example of a particularly significant economic event is a central bank meeting. If the Federal Reserve is expected to cut the interest rate, the US dollar will depreciate before the meeting and continue to fall after it. Then the signal will indicate to buy the pair EUR /USD.


Pro

Many Opportunities If you open an economic calendar, you can't find a day without one or more events.

Cons

Unclear conditions. Since the result of fundamental analysis is not easily predictable, it is more complicated to create signals of this type than technical ones.

In addition, most economic data and news involve increased volatility, making it more difficult to set a good stop loss. If you end up being too protective, the deal could close prematurely at a loss.

Signals based on technical analysis

Technical analysis looks at historical price changes. Analysts use various tools such as indicators, charts and candles to predict how prices will vary in the future. Unlike those based on fundamental analysis, this type of signals are not created only by experts and analysts, but also by Forex algorithms. A Forex algorithm (or robot), in this context, analyzes certain values ​​and indicates possible entry and exit points from the market.

Let's imagine we are trading on the pair GBP /USD. The RSI indicator predicts a reversal of the price trend, with the indicator line falling below 30. This is a bullish sign. The algorithm that analyzes this trend will recommend buying the pair GBP /USD. 

Pro

Easier. Compared to fundamental analysis, technical analysis tends to be more precise because it is based on specific objective conditions. To create a signal with technical analysis just learn to read indicators and other trends or formations.

Con

Far too objective. Basing your positions on the market history is a very effective strategy. But history does not always repeat itself; therefore it is essential to consider the current situation in all its peculiarities.

Manual signals

Hand signals are those studied ad or c by a person: professional traders or analysts who work for a company or on their own use their knowledge, experience and strategies to create a recommendation.

 Pro

Comprehensive analysis. A combination of technical and fundamental analysis is used, plus a subjective interpretation of the market based on experience. This is the most complete picture of the current situation.

Con

Probability of error. Even if it comes from a professional, no one is perfect. The probability of error is always present. 

Automated signals

Automated signals are provided by software programmed with specific algorithms that record market changes and provide a signal depending on some factors.

Pro

Little chance of error. Programs are unaffected by emotions, often misleading, and provide signals based on calculations.

Con

They overlook what is not about the price. Software struggles to consider the fundamental factors and external influences that are crucial to making correct decisions.

Paid signals

Some companies provide signals for money. They often offer subscriptions, but you can also find companies that allow you to pay on a single signal.

 Pro

More reliable. Not guaranteed, but certainly, a paid forex signal is better than a free one, if not the game would not be worth the candle.

 Con

Money. As mentioned, you have to pay for the signals.

Free signals

Most Forex brokers offer free recommendations posted on their site available to clients and non-clients. Similarly, the most popular traders post their recommendations on social media.

 Pro

Free. This is certainly the main advantage of this type of signal. You increase your probability of earning without spending.

Con

No guarantee. If the signals are free, nothing can be expected from the issuer.

Little planned. There is no timetable, the signals come when the supplier decides.

Entry signs

All short-term signals always report the entry price. If you find a short-term recommendation that only includes market exit points, it is best to leave it alone: ​​without a clear indication of entry, you only risk losing money.

 Pro

The crucial moment. Market entry is the most important moment of any strategy.

Con

There is no inherent downside to entry signals, but if the signal does not include information on when to close the position, the risks increase.

Exit signs

Normally the signals include everything: entry, take profit and stop loss. However, if positions are held for long or medium term, only the ideal time to exit the market can be indicated.

 Pro

Relative importance. If you have a position in progress, a signal that tells you when to close it to consolidate profits can be useful.

Con

Only if you have opened a position. If you give an exit signal shortly without indicating the entry, you are missing the most important information for any operation.

Where to find the best Forex signals

Forex signals are available online and it is easy to find a provider.

Forex broker

Most Forex brokers offer recommendations and they usually do both for free and for a fee. If the broker is reliable, they will offer a trial period to test the quality of the signals, and will certainly have a history showing how their signals have led their clients to make money.

The main advantage is that if you find a reputable broker you want to trade with, you won't have to waste time looking for a signal provider. In addition, many brokers offer their signals for free.

There are many types of providers, but if your Forex broker does it for free, it's just perfect.

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Specialized companies

There are companies that offer paid Forex signals. You have to be very careful to check the quality of the signals. Reviews can certainly come in handy.

Software

There are many companies and individuals who program software to deliver Forex signals, but often it is not free material. It is good to proceed with caution before buying, because software has many limitations: they evaluate the market in an aseptic way and do not include fundamental analysis. Better to check the quality of the signals before starting.

MetaTrader

If you trade with MetaTrader, the platform allows you to subscribe to signals. It is also possible to implement your own algorithms to receive recommendations on every opportunity you deem worthy. MetaTrader accepts signals from various providers, but the risk remains that quantity does not lead to quality.

CopyTrade

There are alternatives to trading signals. When using Forex signals you decide whether to follow them completely or partially and, if you have experience, you can consider the signal as advice and modify it.

How to choose a good signal provider

It can be a daunting task to find a good Forex signal provider - the number of companies, analysts, and investors offering this service is very high.

Confirmations

The first decision you need to make is whether or not you are willing to spend on signals. If you decide to spend, you can ask the provider for information about the success rate of the signals. You should also check that the supplier has the right authorizations.

Confirmations are always needed, even when you decide to opt for free signals.

A good provider should prove the success of their signals by sharing historical performance. If no such information exists, a demo account can be used to test the signals.

 Tradersbest.com offers a demo account that mirrors a real account, where you can trade with virtual money without risk and check if the signals are efficient.

Information

Before choosing a signal provider, it is best to check the information and data it includes. The most reliable signals include complete data and information on entry, take profit and stop loss, as well as an explanation of how the signal has presented itself or should present itself. The signals given by automated software have no explanation, but their reliability is based on mathematical algorithms.

Reviews

If available, the reviews of the signal provider should be consulted. Not all companies that specialize in this service show customer reviews, much less will it be possible to find them for signals from a private analyst or independent trader.

It is always better to check and not believe impossible promises.

 Huge earnings

The Forex signal market is full of scams. Any provider that guarantees huge profits is likely to just want to pocket your money.

In order not to become prey to the wolves of the FX world, check signals for trading Forex from different sources or Signup to AtoZ Markets Premium Signals

 Comparisons

If you are unsure whether one provider is better than another, compare the success rate and the information provided. If there is no detailed explanation, the signal is probably not very good.

How to take advantage of trading signals

To understand how to proceed, let's take an example focusing on the XAU/USD pair. The signal is: SELL 1,764; TP 1.759; SL 1,766.

  1. Point 1 The signal clearly indicates to sell gold against US dollars. The market entry price is 1.764, so a sell order must be entered at this price.
  2. Point 2 Stop loss (SL). Since it is a sell signal, the stop loss must be placed above the entry price.
  3. Point  3 TP stands for take profit. The take profit must be placed below the entry price.

If the signal does not include a chart, the information probably shows the current price of the instrument. By reading it, you will understand if the signal is still valid.

Conclusions

Forex signals are great for both beginners and professional traders. They save time, effort, and provide excellent revenue opportunities. The high number of suppliers makes it difficult to choose the one that best suits your style, to which is added the risk that it is not reliable.

For this it is best to test the signals with a demo account. A demo account allows you to test the signals for free in a safe environment, to check if they are really worthy.