What is a Forex Trading Signal?
A forex trading signal is essentially some specific information about a particular currency pair. This may include information about potentially profitable entry and exit points, stop loss and take profit targets and so on. It may also include economic (fundamental) information which a trader may use to better inform his trading decisions. In other words, forex signals are tools that traders may use to gain an advantage in forex trading. These signals may be received through SMS text messages, email messages, or through a website. In any case, these signals are usually sent and received in real time so that traders can take advantage of current, up-to-date information.
What to Look for When Choosing a Forex Signal Provider
Since there are many different forex signal providers offering this service, the trader should understand what to look out for when deciding which provider to use. Forex signal providers tend to fall into two (2) broad categories – those who use technical analysts to generate their trading signals, and those who use fundamental analysts to generate their trading signals.
Technical analysts rely heavily on technical analysis methods which involve the use of trading charts to generate trading suggestions. This method involves the analysis of trading charts, looking at things like candlestick patterns, price action, areas of support and areas of resistance, and so on. The best forex signal providers have their own proprietary systems that generate these signals based on years of research and testing.
On the other hand, fundamental analysts rely heavily on fundamental information such as prevailing interest rates, inflation rates, rates of employment, significant economic news, central bank policies and such the like. This method requires that analysts stay updated on the news and on events that may have significant impacts upon the currency markets as well as other financial markets.
Forex signal providers may provide the signals for free, or they may require a monthly fee usually ranging for between $75 and $150 per month. In either case, traders should consider the reputation of the provider before committing to them. It is best to choose a forex trading signal provider that has a track record of success.
When choosing a forex signal provider, you should also bear in mind how the timing of their signals relates to your preferred trading style. Scalpers, day traders, swingers and position traders all have different trading timeframes, and each would therefore need to choose a provider whose signal timing aligns with their own trading style. Nevertheless, the quality of the signals is more important than the quantity.
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