Trading signals are recommendations to buy and/or sell financial assets that are based on market analysis. They help to identify trading opportunities and can be free or paid.
Trading signals are recommendations to buy and/or sell financial assets that are based on market analysis. They help to identify trading opportunities and can be free or paid.
Usually, a signal is a very short message that contains only the basic elements and looks like the following:
- BUY EUR/USD at 1.1240
- SL at 1.1220, TP at 1.1270
Stock market signals help novice traders to get the accurate information on trades recommended by forex signal providers in real time. However, be aware that these signals are not infallible.
Types of Forex trading signals
There are 5 main types of Forex signals and a trader's choice will depend on their goals, the time they are willing to dedicate to trading, their wanted level of activity and control, and their willingness to accept risk.
1. Copy Trading
When Copy Trading service is used, the account of the signal provider and the trader's account are linked. When the signal provider opens a trade on his account, it is automatically opened on the trader's account.
Trading is automated, but account management is collaborative in copy-trading. The provider remotely opens positions on the client's account, while the trader has full control and can freely interfere in operations if he wishes.
These are paid trading signals because they involve a subscription.
2. Manual signals
Manual signals for Forex trading are generated by a human. For this purpose, a trader has to sit in front of a computer for a long time, deeply analyzing and searching for signals to make a final decision on whether to buy or sell an asset. Decisions made by a trader in this situation are based on his own interpretation of market data and can take a long time.
3. Automatic signals
A trader can also use automated trading software that will automatically generate real-time trading signals or even open positions in your account. The important thing about automated Forex signals is that the trader simply directs the software to perform a search for trading signals to follow.
The psychological stress that a person involved in this process feels is completely eliminated. The program automatically determines what action to take: buy or sell. The trading operation will be successful if the program has been properly prepared and created by a real expert.
Trading robots can process much more data than a human can. This will allow you to manage trading multiple currency pairs and other assets, as well as keep control of all the charts you are interested in 24/7. However, the best option is a hybrid of both manual and automated trading, which is what most professional traders do.
Automatic trading signals open positions on the account independently, while semi-automatic Forex signals only indicate trading opportunities, but the decision to enter the market or not is made by the trader.
4. Trading alerts
In this case, the trader fully manages his own trading account. You can analyze the markets or subscribe to signals and set up trade alerts to open/close positions, which you will receive when certain market conditions occur.
This increases the level of trust, as it prevents a third party from exercising full control over your trading account, but on the other hand, you accept the psychological risk.
In this case Forex signals are received in the form of a messages that are sent to your E-mail, by SMS or in a mobile messenger. After that, the trader makes trading decisions on his own. Often such trading signals are paid.
5. Account management
Unlike using regular trading signals, in this case the accounts are at the disposal of a qualified account manager who invests the funds on your behalf, receiving a salary or a fixed share of the profits.
The provider, or more specifically the manager, has full control over trading operations and usually does not inform the account holder about decision making, but only about the results. This trading option involves risks, so we advise everyone to learn how to trade.
This allows you to do your own analysis and make your own trading decisions, allowing you to stay independent from others.
Types of Forex signals by analysis method
Signals based on fundamental analysis
The fundamental approach implies a quick interpretation of news and opening a position after their release, according to the economic calendar.
Example: if Christine Lagarde's (ECB President) speech was positive in terms of the Euro's prospects, the signal will be to buy the Euro against the US Dollar (EURUSD).
Signals based on technical analysis
It is an approach based on technical analysis by professional analysts or traders. It is important to point out that most signal providers rely on signals based on technical analysis, only a minority works with fundamental analysis.
Example: DAX price broke through the resistance level upwards and continued the uptrend. This will be a trading signal to open a position to buy the index.