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Understanding Forex Signals: How To Identify What’s Good And Bad?

Understanding Forex Signals: How To Identify What’s Good And Bad?, FP Markets

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Forex market trading signals are short notifications of information containing buy or sell instructions. This can be for currency pairs, stocks, or cryptocurrencies, for example.

Some signal providers—companies that provide trading operational signals—deliver additional information on top of a simple buy or sell instruction. Signals provide pointers for the trading decisions and can be delivered through email, text message (SMS), WhatsApp, and social media. Telegram is one of the most popular signal portals right now. There are many Forex signal providers to select from, therefore it can be overwhelming when you begin looking for a provider.

Below are two major types of Forex signal services.

Automated Signals:

Signals for automated FX trading will execute trades on your behalf. Certain providers may also alert you to market conditions, such as low or high volatility/volume, as well as your protective stop-loss orders and take-profit orders being triggered. The psychological and emotional aspects of investing tend to be lessened through an automated method. Furthermore, it can prevent human errors and, thus, lowers response time.

Automated signal providers are computer software programmed to produce trade orders when specific predetermined criteria or market conditions are met. Automated signal providers and other trading bots often use mathematical indicator-based technical analysis techniques. However, some may be built to utilize fundamental analysis systems: monitoring economic news releases and market sentiment.

Manual System:

Many day traders prefer Forex trading manual signals, which generate a trading signal for the subscriber. It is then down to the subscriber (trader) whether they accept (and act on) that signal.

This procedure drives them to buy or sell in a direction that has historically led to profitable trading opportunities, according to the signal provider’s historical performance.

The Difference Between Automatic and Manual signals.

Automatic systems conduct most of the decision-making process for you and are popular with beginners.

In contrast, manual trading gives the trader the final say and is probably more suited to professional traders looking to complement their current trading plan: their trading strategy.

Examples of Trading Signals

Numerous so-called free Forex signal providers regularly advertise their services. Paid signal providers generally display their historical performance, therefore this is a crucial check for those interested in signal services.

Ultimately, it would be sensible to not rely on trading signals in isolation but to integrate them into a trading plan to ultimately complement your Forex trading strategies. Technical and fundamental analysis signals, of course, can be wrong, and viruses, system errors, or malfunctions could end up costing the trader money.

Depending on your signal provider, they may send various information, as shown in the examples below.

Example 1:   BUY GBP/USD @ $1.1468

The signal begins with the order’s direction (BUY). It might also be referred to as Buy (Long) or Sell (Short). Following this, the trading instrument is shown and may take the form of the currency pair (GBP/USD), or could be represented by a currency nickname, such as Greenback. This is then followed by the real-time execution price ($1.1468).

Example 2:   Sell EUR/USD at CMP $0.9308 – SL $0.9333 – TP $0.9277

Breaking down this signal reveals that the immediate action is to Sell EUR/USD, followed by the CMP (current market price) stated as $0.9308, with a protective stop-loss order and a take-profit level set at $0.9333 and $0.9277, respectively.

Here, you can see that the second example provides more detail in regards to the signal: a protective stop-loss level to aid risk management and a take-profit order (note there can be multiple take-profit order levels). Some signal providers may also add timeframe and their method of analysis, which could involve moving averages and price action, as an example.

Three Types of Signal Providers

  1.  Traders:

These are considered the most trustworthy signals: Forex traders who share their trade ideas through their independent market analysis based on their trading skills and trading experience. An independent trader has a reputation to consider, so they are more likely to provide suitable, reliable signals. However, it is important to understand that there is no such thing as the best Forex signal providers.

2.   Brokerage Affiliates or Partners:

When you sign up with a broker, you may be entitled to a free trading signal service from the affiliates or partners, but as with all investing, you must ensure these signals are right for you.

3.   Scammers:

Beginner and experienced traders should take care not to let their guard down. Forex signals can be used to defraud the uninformed. Trading signal providers offer financial services, such as Forex trading signals, and state the signals are based on expert forecasts and ensure profits for traders. This tends to be inaccurate in most cases.

For this service, signal providers often charge a daily, weekly, or monthly fee. To win the trader’s trust, they often have numerous testimonials and post pictures from allegedly credible sources of investors living a wealthy lifestyle and driving high-end cars. Realistically, the signal providers are unable to predict winning trades.

Many offers claim a 100% success rate; beware of these. There is no guarantee that the strategy will pay off either in the short term or over a longer period. Scams are becoming increasingly hard to spot with professional-looking websites and seemingly helpful advisors.

Understanding Forex Signals: How To Identify What’s Good And Bad?, FP Markets

 

Final Note

One option for those wanting to explore trading signals is to receive signals through a Forex broker such as FP Markets, a fully regulated CFD Forex broker with many years of experience. You can access Forex signal providers through the FP Markets Partner Program using the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) trading platforms.

When working with FP markets, you can also practice using expert advisors, copy trading, and much more with a demo account before you risk real money.

Head over to FP Markets and open a trading account today.

  • Understanding Forex Signals: How To Identify What’s Good And Bad?, FP Markets
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    FP Markets

    FP Markets is an Australian regulated broker established in 2005 offering access to Derivatives across Forex, Indices, Commodities, Stocks & Cryptocurrencies on consistently tighter spreads in unparalleled trading conditions. FP Markets combines state-of-the-art technology with a huge selection of financial instruments to create a genuine broker destination for all types of traders.

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