Forex signals are suggestions to the trader about entry and exit points at which trades may be initiated and they will generally contain recommendations about timing and price. For convenience, these signals are often provided by third party providers who will either use human analysts for provide subscribers with an automated trading robot which will receive the signals. Because these signals have to be immediately communicated, they are often communicated by instant communication channels such as e-mail, text messages or even via Twitter. Signals generally provide information to Forex traders who helped them to decide on initiating positions and the timing of exits and entries.
Traders often use a combination of many signals to arrive at buy and sell decisions and could choose to create their own data or to set up automated trading programs for the purpose. In fact, many traders use different strategies for different currency pairs and therefore require different indicators. Different systems require different signals which can work together to provide a solid basis for the decisions made by the trader. The use of different signals also makes it convenient for one to cross check the findings and the recommendations of another. However, all signals are not entirely reliable and it is up to the trader to understand his or her requirements in detail and then decide what is best for that particular trading strategy. Signals can be affected by a number of factors and the trader should be particularly careful not to act quickly on signals that may turn out to be false.
The importance of signals is not restricted to traders dependent on technical analysis because they can also be used for fundamental analysis. Forex traders need to keep track of the economic well being of countries and the economic factors that provide them with ongoing information. High quality signal providers will keep track of a multitude of current events including the more obvious ones such as consumer confidence and the consumer price index. They will also keep track of less obvious factors such as interest rate policies and weather conditions. As soon as any information relating to this is released, the signal provider would immediately send out messages to subscribers so that they can evaluate the impact on their positions and act accordingly. Because the economies of the world are in the state of constant change, signal service providers are constantly tracking new developments in order to stay on top of and communicate these changes.
About signals service providers
Signal service providers generally fall into different categories. Some of them provide free services or services that do not require payment. Others who require payment generate the signals from their own analysis whether human or otherwise. The third category who also provide paid for services act as aggregators of information provided by other providers. Still others provide signals through Forex robots provided by then installed on the trader’s computer. Other services offered by these providers include:
-information about entry and exit points and how to set stop losses
-charts and analysis supporting the recommendations made
-educational resources including one on one training and other interactions
It is important to note that many signal providers are nothing but scams and you should beware of providers who make promises of making you a millionaire overnight. It is also important to remember that all free services are not necessarily bad just as many paid services are of poor quality. Most providers provide signals based on technical analysis though a few concentrate on fundamental analysis. They can support both long-term and short term objectives and you should take the service that best supports your trading style.
The best trading signals
Because there are thousands of trading methods and strategies that you can use, there are thousands of signal providers who provide services. Depending on your trading style such as automated or manual, you should choose the provider who can best support this style. For instance, automated trading is often conducted by automated software programs or Forex robots which can process signals and trade without human intervention. Other traders prefer a more controlled form of trading in which the trader decides to use signals but makes his own decisions about entry and exit. Be careful if you go to the other extreme and decide to rely entirely on your signal providers because this would be blind trading where you only know the entry and exit levels and the stop loss. The best long-term solution is to develop your own signals after having gathered enough knowledge and experience.
The chances of executing a profitable trade are greatly improved if the trading signal can be confirmed and, in fact, experienced traders will look for several confirmations before actually placing an order. The confirmations serve to validate one another and technical traders often use oscillators for the purpose while traders who use price action may rely on support and resistance levels. You can use any time frame that you like but keep in mind that short-term charts such as one minute and five minute charts can provide many more signals. However, the signals generated by the longer term charts tend to be more reliable.