Sharpen your investing instincts with forex trading signals

  • By Luke Andresen

  • August 9, 2018
  • 8:17 pm BST

Many forex traders choose to use forex trading signals to inform their investment strategies because they offer useful market insights. These indicators form the basis of many forex trading tips and techniques, and traders around the globe employ them to enhance their ability to make critical decisions.

There are many kinds of forex trading signal systems. Some are offered for free, while others might require a fee.

Before buying access to a signals system, request access to a demo account and test your skills. This will allow you to gauge if you prefer working with signals. You’ll also get a feel for the platform, so you can decide what you like and dislike about it. These trials mean that you can make an informed decision before paying for access to the one that best suits your needs.

You also need to thoroughly check that the signal system is trustworthy before buying it. A system with integrity should include transparent information on profit taking and any commissions payable, along with information about stop loss configurations. 

How do traders receive trading signals? 

These are typically received through text messages or email. This approach keeps things organized so you can track your trades. It also minimizes the risk of you overlooking buying or selling opportunities because you overlooked them or encountered them too late.

What must you keep in mind when working with signals?

You will not be able to use a strategy such as scalping too often, as this depends on a high volume of quick, short-term trades. By the time you see the signal, it will already have closed.

How the signal system works 

Every system is slightly different, but there are two main methods that guide the market experts.

The first system involves a technical breakdown of the market, including all historical information that is available about pricing and trends. The second is based on current events and analyzing how they might affect the price movements over the short and long term.

Other signal systems are automated and based on a computer analysis of the market. Experienced traders show the automated system how to respond to different events, until the system produces signals of its own with the help of machine learning. A big advantage of this approach is that the potential for human emotion and judgment error to interfere is completely negated. At the same time, however, this strength can become a flaw when human discretion is indeed required to tailor the rigidity of a computerized system.

Another approach relies on analysts who input their decisions into the system and turn them into buy/sell signals. Technical indicators, solid market analysis and trends should all form the basis of the signals. The technical indicators used should include Bollinger Bands, Fibonacci levels, support and resistance levels, stochastic lines, moving averages and breakouts.

In terms of currency pairs, the greatest challenges are GBP/USD, USD/CHF, USD/JPY and EUR/USD.

Forex traders, whether they are novices or experienced veterans, should note that heeding signals is not a fail-safe method for success in the field of forex trading. All signal systems have drawbacks, and none of them are completely accurate all of the time. These signals should be used to supplement your existing trading strategies and system, but as with any other tool, it should not be the only one you use or blindly trust. You will improve your level of success by learning to employ it gainfully and by using it to enhance your instincts instead of replacing or overruling them.