- July 31, 2020
- Posted by: Brenda Knight
- Category: Consulting
Forex signals are tips, suggesting you to get into a trade over a currency pair. This tip is a factor of several analyses based on charting and news. Eventually, it tells you about a specific time and price at which the trade must be made. These signals are sent over to the subscriber over email, SMS, RSS feed, or business chat rooms, in a quick and precise form. Simply put, a forex signal is a tool that will help you with your strategy, trading efficiency. It will ultimately enable you to churn more profit out of your trades.
The Forex marketplace, like other trading markets, works highly on speculation, anticipation, and prediction of worldwide market behavior. The ultimate buying and selling of currency pairs minted by two different countries take place at the foreign exchange marketplace, and a very significant part of this international trade activity is called ‘forex signal’.
So, our concern lies with the actual aspect of the forex signal, its working dynamics, and its impact on a Forex trade. When all of this is asked together, it makes up for a simple question which is, what is a forex signal?
Who generates these forex signals?
The source of these signals is not singular or centralized. Anybody can generate these tips through their study, market research, and anticipation. But, the ones that are popularly used amongst forex traders are those signals that are provided by any third party who specializes in the field. They can be either entities of financial firms or other renowned traders themselves. There are forex robots supplied by trading software that perform similar tasks in providing forex signals. A forex signal from an experienced and famous trader will always hold more value in the market as compared to other sources.
Different types of forex signals?
As the signaling system is a decentralized entity of an already decentralized marketplace, there are only two broad categories of these services, i.e., free forex and paid forex signal service.
There are a few parameters that are used to present a signal in a precise yet comprehensive form. These are:
- Action – This term is a call-to-action about the signal sent for the particular currency pair.
- Stop-loss – This is used to signify an exit point in your trade to save your capital from massive damage.
- Take profit – This term is present in a signal to mark an exit point which is opposite to a stop loss. Here the exit is made when the speculated profit levels are met to avoid any further correction in the currency pair.
- Current market price – This term is used to tell the ongoing market price of a currency pair. It is also used as a reference point to compare prices between the signal time and the time at which the trade is being entered.
This brings us to the question of how to use forex signals?
The use of these tips varies amongst different traders in usually two ways, either they are used for an automated trade or a manual trade.
Automated trade is executed based upon a signal by the trading software itself. The command is given by the trader to the software beforehand to carry out a business when a forex signal indicates the value of a particular currency pair goes close to the pre-decided value, for example, when a sign indicates CMP value close to the 100-day average. Similarly, the trader can set a value for stop loss and book profit to automate the whole trade.
A manual trade involves the real-time human intelligence and emotions which act upon the forex signal. It is less efficient when compared to an automated business but has its own set of pros. Manual trading in forex makes the trades more immune to major economic events; in such cases, it is the human instinct and anticipation that works best for making profitable trades.
But, there must be a way that comes on top of all. What is the best trading strategy to use a forex signal?
Even though there is nothing that fits all size strategy while with direct forex signals, there are surely methods and practices based on a trader’s experience level. Along with market trends, volatility, and economic shifts, for someone who is a novice, it is advised to build a research ethic around market conditions. Then it’s advised to follow forex signals from expert traders and brokers. Choosing to go for automated trades is also something that beginners have relied on just like retail traders.
Forex trading requires nerves of steel, more so than other marketplaces. This is where experienced traders flourish with their long hours and numerous trades in deep waters of forex. One defining attribute of experience is the ability to identify quality signals and anticipate currency pair movement by self-analysis as well.
What determines a quality forex signal? Is there a best Forex signal provider?
Not all forex signals are the same. Not all signal providers are the same. The difference between a quality and weak forex signal is its success rate. There are signal providers with a success rate of more than 50%, while there are some with an abysmal set of success numbers.
Look for the track record of the signal service provider before subscribing to its platform. This will give you the first picture of whether to go with the subscription or not. While the success rate is an initial benchmark, it is still not the be all end all aspect of Forex. One must look beyond it and do comprehensive research as it is going to something that you will trust with your capital.
The timezone of your signal provider is another make or break factor when considering its relevance to you. If your Forex signals are coming in at a time when you are sleeping, they are not as valuable to you. Market behavior can shift drastically between the time lag that your tip and your trading time carry. This can make the advice highly irrelevant to your trade. So, try to go with a forex signal provider that shares the time zone with you.
The theme of analyses is also a defining factor considering your trading style. As mentioned above, two broad categories are used to generate a signal
- Fundamental analysis – which uses news, events, and global economic activity to decide upon forex movement and hence, generates a signal.
- Technical analysis – which uses charts, past actions, and other number-based activity of the currency.
While both these analyses work in their way, there is no definite bar on which is better. It all comes down to the trader’s style and which kind of analysis suits that particular style. Selecting a quality tip is the first step, to make a good trade out of it is what will make it the best forex signal for the trader.
Is it safe to rely on FREE FOREX SIGNALS?
There are many service providers and traders who give their analyzed tips for a demo. While one can always do a quality check, it is advised to try different signal providers and their services on a free demo basis. One can use these tips in a virtual marketplace to safeguard their capital and see if the signals are worthwhile or not.
Pipodrome is one of the free Forex signal providers and all you need to do is register. It takes a minute to do it and become a Bronze member and get one free tip each day!
How to make the most out of these tips?
Whether it is a free forex signal or a paid one, they generally come with a ‘stop-loss’ and ‘take profit’ margin. In case a trader is using automated actions, his or her chances of making a more significant profit might get restricted. This is where the experienced trader triumphs in profit booking, as they usually take the signal as a reference and place their trade accordingly. Increasing the ‘make profit’ bar or adjusting the stop loss according to one’s style of trading is something that makes the most out of a forex signal.
How crucial is the forex signal for forex traders?
The Forex marketplace is notorious for its get rich quick like attributes. While it is wrong to blame a trade practice for the reluctance of traders, who choose risky trades over mindful action, it is also known that Forex requires more attention and analysis than other marketplaces. The spectrum for market activity and volatility is very high and hence it becomes quite a task to carry out valuable research every day. To reduce this task and the disproportionate risk factor, Forex signals (or quality forex signals) becomes a crucial part of a forex trader’s life, irrespective of the experience level.