What is a Forex Trading Signal?
A Forex trading signal can be defined as a suggestion or recommendation to enter into a specific trading transaction on one of the currency pairs, at a given time and at a given price.
These recommendations service is provided either through a Forex Robot, a system that is programmed to automatically provide trading signals. In some systems, transactions are opened and closed automatically without the trader intervening. In others, the signal is sent and traders are allowed to enter or not. Or these services are provided directly by expert traders who have a great knowledge in this field.
The trading signals provided by the expert traders are better than the Forex robot because the robot is not programmed to deal with all market situations. Forex markets are dynamic and constantly changing. The recommendations made by the expert traders can be discussed, and the trader has full freedom, to accept or to not accept the recommendation.
On one hand, these trading signals may be short, medium or even long-term, depending mainly on the nature of the trader. From the other hand, the trading signals targeted a certain number of pips*, maybe a few, for example, 10 pips for a single transaction and this is often consistent with the short-term transactions, and some of the trading signal targeted about 300 pips for a single transaction and this is consistent with the nature of long-term transactions.
This service is provided by many brokerage companies or by other private companies, including what is free and what is paid. Alerts and updates of each recommendation are sent by either e-mail, SMS or any other method that the company seems appropriate. Free services are often provided by brokerage firms to encourage traders to open trading accounts through them. The paid ones are usually made by private companies that seek profit by providing this service in particular.
*pips: is the smallest unit of the price that reflects exchange rate movements. When the exchange rate changes, this change is indicated by the pips. The pip is the fourth number after the decimal in all currency pairs, with the exception of JPY pairs, where the pip is the second number after the decimal.
What are the different types of Forex trading signals?
- News trading signals:
The news trading signals are concerned with the fundamental aspect of the analysis. The providers of these signals follow the economic indicators at the time of their issuance, in addition to following the important speeches that are likely to have a significant impact on the movement of the currency. Such signals need to be speedily provided. At the time of the news, strong and rapid movements occur, so the traders can get a good profit in a relatively short period if they got the right signal at the right time.
News trading signals providers not only send buy and sell orders, they also leave a comment on the news. They explain why the currency has moved in a certain direction at the time of the news, and the potential future effects.
- Technical trading signals:
Technical trading signals are those signals that are provided to traders based on the basics of technical analysis. These signals depend mainly on technical indicators and mathematical equations, to follow the price movement, analyze its strength, and predict future trends based on the historical movements of prices.
These signals are the most prevalent in our time. Moreover, most Forex Robots are programmed depending on technical indicators so that if the price movements agree to the terms on which these robots were programmed, signals will be automatically sent to the traders or open deals without their intervention.
The providers of these signals are trying to combine several indicators and integrate between the different technical analyses methods to get better results. Also, the provider of these signals tells the traders about the potential risk level and the acceptable range of loss, this makes signals more meaningful.
Examples of these signals, the signals that are provided based on the RSI (Relative Strength Index) and the signals based on the Bollinger Bands Index.
- Real-time trading ideas
The real-time trading ideas are mainly intended to transform the analysis into a mature trading idea. It is more than just an analysis of the markets. The most important examples are “the webinars”. The webinar is a lecture that is offered to traders through the Internet. Most of them are free of charge without any price. Any trader in the world can registries for these webinars and present it.
These webinars consider an effective tool, especially on the knowledge side, its allowing traders to interact directly with experts, ask questions, inquire about unclear things, and build their trading strategies.
What are the services that the traders get when they register in Forex trading signals?
The main service obtained when registering in Forex trading signals is to determine the time and price of entering the transaction, the time of exit, and profit taking and stop loss orders. In addition, a number of services are offered, including:
- Determine the most likely trend of the market; is it an uptrend or a downtrend?
- Identify patterns of technical analysis in its formative stages.
- Giving signals about breaking support and resistance levels.
- The integration of more than one method of technical analysis.
- Determine the optimal transaction volume with an acceptable level of loss.
What are the advantages of Forex trading signals?
Regardless of the services provided by the Forex trading signals mentioned above, it achieves many advantages including:
- Trading signals are very useful for traders who do not have enough time to analyze price movements and monitor the market continuously.
- It is a good learning tool especially for beginner traders when they try to understand the analysis sent by the service provider and when they ask expert traders about unclear things.
- Provide traders with the newest updates and price movements instantly.
- These signals are issued by professional experts, so they are featuring with a high degree of mastery.
- Users are allowed to unsubscribe this service at any time.
How can I choose a service provider of trading signal?
Recently, the number of companies providing this service has increased significantly, as it has become difficult for traders to distinguish between reliable companies that can offer profitable trading signals and companies that seek only to profit through commissions and subscriptions. To find a reliable service provider consider the following:
- Ask other traders who have previous experience with the service provider.
- See the results achieved by the service providers during their work and their reputation among traders.
- If you are a trader who wants to execute quick and short transactions, avoid subscribing with service providers who are known with delay and slow execution.
- Review the trading history of each service to find the ones that suit your trading method.
- Some companies need high prices to get this service, so make sure if this fits you or not. It is not reasonable that the profits you earn, you will have to pay as a subscription fee to the service provider, so you have to choose the reliable service that its price suits with your capital.
How do Forex trading signals help in making profits?
Based on the above, we can deduce how trading signals help in making profits:
- Trading signals provide strong recommendations to execute transactions that achieving a good number of pips.
- Trading signals help traders to build their trading strategies. Providers of these services explain the reasons for entering the transactions, giving the full analysis that is based on scientific backgrounds and giving the opportunity to speak with experts.
- Provider of these signals gives advice to traders about the volume of a transaction to help them manage their capital properly. They also advise traders in determining the size of losses that do not threaten the account if it occurs.
- Reliable trading signal providers are flexible in terms of their ability to deal with different types of traders, both those who invest large amounts or those who invest in small amounts, and they are flexible in terms of the ability to deal with traders who aim to profit on short periods and those who aim to profit on longer periods.
Finally, it should be noted that many traders asking about the usefulness of trading signals. If these signals are profitable as they say, why they share it with others? Instead, why don’t they keep them for themselves? In fact, there is nothing prevents the experts from taking the advantage by trading for themselves or even by providing the signal service for a certain fee, both will benefit them, especially if the reputation of this service is a good and large number of traders subscribed in it.
Note: There’s a problem many traders face which is misleading advertising. For example, advertisements that tell traders that they will earn $1 million in a short period when subscribing to such signal service. This will leave a bad impression on the companies that offer such advertisements. In fact, there are many trusted companies that provide this service in a meaningful and reasonable manner, so traders have to research well, and adhere to the five standards that we talked about, in advance, when choosing a service provider.