A trading signal is a hint to the kind of entries and exits that a forex trader should execute. Forex trading is a high-risk business and should be done properly to avoid big losses. A trading signal helps traders to execute their trades profitably and exercise risk management.
What is trading signals?
Trading signals are suggestions on the appropriate trading decisions made by a forex trader. The signals are either automated into the trading system or provided by human analyst. The signals give the entry and exit positions for the forex positions entered by forex traders. Good trading signals also align with the forex trading techniques used by a trader and usually factor money management aspect. In this case, they provide target profits as well as hard stops that serve as protection against adverse market turns. TradeFW.com is one of the best forex brokers that provide trading signals for their clients.
Types of trading signals
The forex signals are categorized based on the function they serve and their method of operation. The available signals in the forex market are grouped into:
Manual Forex Signals
Manual trading signals are identified by humans after sitting for hours end on in front of their personal trading devices such as computers or tablets. The traders then make a trading decision based on their market analysis on whether to enter a long or short trading positions. The trading decisions are, therefore, based on the human analysis and interpretation of the forex market conditions.
The signals can be developed by one analyst and provided to other traders for free or at a fee. The advantage of this type of signal is that a trader can assess the forex market information on real time basis and use his or her experience to note abnormal market conditions. Trading decisions can, therefore, be adjusted appropriately.
Automated Forex Signals
These signals involve the use of a forex trading signals software to identify trading opportunities. The forex trader just issues customized commands to the signal softwares to generate trading signals based on the prevailing forex market conditions. Forex traders, therefore, rely on the accuracy of a forex trading signal system to make their trading decisions without having to manually extract them.
The human stress factor is eliminated in this form of trading. Automated signals are advantageous because a wide range of data is assessed by the trading robots as compared to conducting human analysis. The traders are, therefore, able to monitor charts for different currencies without missing out on good trading opportunities. However, a hybrid of both manual and robotic trading is recommended for successful trading.
Features provided by Forex signal service providers
Forex trading is greatly aided by forex signals that have the following features:
Some signal providers choose to trade on your behalf based on their own analysis either through their automated systems or human analysts. Account management ensures that the real forex account owner gets a certain percentage of revenue over a specified period from the account management firm or professional.
supporting information may be given in form of charts or graphs to help a forex trader interpret the trading signals.
A trial period
A forex trading signal system may offer a trader a specified period of time to try out a forex signal for free or charge a little price.
Method of interaction
Signal providers may avail a system of interaction between them and their clients either though chats or comments section.
A signal provider should have a trading history to establish their credibility. The history reflects the winning trades as well as the losing trades. Drawdowns may also be recorded in this history and the reasons behind them. A trading history adds trust to the competence of the signal provider among the prospective forex trading clients
How to use trading signals to succeed
Practice makes perfect
Trading forex signals should start with practicing them on a demo account until a trader is consistently profitable before moving on to the live forex market trading. Practice provides consistency and discipline needed for successful trading.
Applying money management
The signals should also be accompanied with a careful money management system for long term success and sustainability of trading decisions.
Critical evaluation and emotional control
Trading decisions should be made objectively. Trading signals should be evaluated before executing trading positions to determine their suitability and accuracy. emotional trading should be avoided at all costs and trading signals followed with strict adherence to avoid trading inconsistencies that prove costly in the end.
Forex trading signals are an essential tool for successful forex traders. Forex market is driven by various dynamics and trading signals helps in clarifying the appropriate trading decisions that can be made by a forex trader. The signals are also useful in identifying the proper risk management for traders and are, therefore, useful for beginners and experienced traders as well.