What are forex signals?
There are different types of forex signals. To help in describing them more easily we have classified them in three main categories:
- Manual vs Automated the difference lies in the way that trading signals are generated. Manual ones are generated by a person such as a professional trader and market analysts, whereas automated ones, such as EAs and trading bots, generate signals by computer software that has the ability of tracking and analysing market price actions according to coded algorithms.
- Paid vs Free this is based on the price of a signal service provider as some offer free signals whereas others demand payment. It is important to point out that free signals might be only for a trial period although in some cases they are unlimited. Paid forex signals are either charged for with a one-time fee or else based on a subscription model.
- Entry vs Exit some signal providers may provide just entry signals for traders to open a trade position, whereas others provide only the exit signals, so that the trader can close an open trade position that he has running on his account.
Forex signals are very helpful, especially when considering how many fundamental, technical and sentimental strategies traders use. Forex signals offer better tracking opportunities and they can also apply different strategies with them.
Another advantage of forex signals is that they can help to save trading time. A typical forex signal provides the trader with the most important information to make a decision, such as the entry, stop and take profit price levels. Traders can also manage to make the most of the best opportunities in the market thanks to forex signals.
Having said that, it is important for traders to understand how to use such signals properly and efficiently. Forex signals are prone to market risks and so it is important for a trader to primarily determine his risk tolerance level. It is also recommended that traders avoid executing forex signals during periods when high impact data is released. It is critical to always stick to the original trading plan.
Whether you use forex signals when trading is something you need to decide as a trader since it mainly depends on your trading goals and aspirations. In order to ensure that you make the most of these signals, it is best to:
- Choose a reliable broker who can offer a good platform so that forex signals can be executed smoothly and timely.
- Choose a reliable signals provider. Some providers offer a trial period and in case of automated ones you can use back testing.
- Customisation possibilities are important to help you align the signals to your trading goals more specifically.
- It is best to avoid resorting to free forex signals as these generally come from disreputable sources.