Ok so we can all safely agree that forex signals are increasingly becoming an indispensible part of the daily trading conduct for many, because they do offer invaluable information. The driving force behind an individual’s decision to resort to forex signals is essentially the hope of replicating the alleged success of others, or the signal providing system, in order to maximize the return on their investment through forex trading.
In a nutshell, a forex signal is a trade alert for the currency market, i.e. a combination of factors analyzed in order to determine whether a person trading in the forex market should buy or sell a specific currency pair at any given point in time.
Nowadays, there is an abundance of forex trading signals of different kinds for purchase on the internet, at price tags which vary from free to ridiculously high amounts. One of the reasons for the great diversity in the signals offered and the associated price to pay is the fact that forex signal systems are based on charting tools derived from technical analysis or on news-based events, although we should perhaps note here that the ultimate decision to sell or buy is an amalgamation of signals merging together towards one direction.
We should also draw attention on the distinction between manual and automated signal systems. Obviously a manual system presupposes the existence of an actual human, usually a very experienced trader, who sits behind a computer screen and sends out buy or sells signals based on the analysis he performs. On the other hand, automated signal systems are based on dedicated software which looks out for specific parameters and data to reach the signal decision to be send out. Some argue that automated systems are superior, since the psychological element that could be hindering and detrimental when a human decides, is in this case eliminated.
Another essential distinction we need to highlight is between news trading signals, technical trading signals and general trading signals. News trading signals constitute perhaps the fundamental approach to forex signals, and since they are based on reacting to a piece of noteworthy development, in the form of an item economic news, speed is of paramount importance when trading based on such signals. This entails having the news as early as possible in order to react to it by placing the buy or sell decision in its immediate aftermath, which will enable the maximization of profit. Such signals are usually accompanied by commentary and analysis on weekly and daily bases.
Technical trading signals are plainly put trading tips, which are derived on the basis of technical analysis. What they presuppose is that you trust the person or company issuing this kind of signals, based on their proven prior performance track record and honest background, because instead of entering your own orders you trade based on these signals. More often than not technical forex signals are issued pack and parcel with various risk management strategies in order minimize the losses incurred by the trader, in case the plan does not work out as expected. Most forex signals which are available online come under this category and the sheer volume of available choices out there makes it almost impossible to discern the credible sources from the unscrupulous ones.
The signals that come under the General Trade signals category consist of a service that feeds traders with general trading tips. Their alerts generated through this type of forex signals usually combine both fundamental and technical analysis and thus often employ a multi-faceted approach.
Forex signals cannot only be obtained by specialized companies in the field of signal provision or generation, but also by a number of forex brokers, who offer this kind of service to interested traders holding standard or V.I.P accounts with them. If you receive signals from your forex broke you are most likely to be receiving them for free, while the price tag for such a service from specialized companies or even individuals varies greatly and it can either come at a small daily fee or as a long-term access package entailing a one-time subscription fee being paid in advance.
In line with the price differences that exist, so are the services that one actually receives from each forex signals provider extensively different from provider to provider. The range of types of information received ranges from performance trackers, sms, email, and online alerts, to customer support via email or phone, and advanced analysis which is usually thrown in some of the more sophisticated package deals.
Since signals providers must protect their strategies and they therefore often refrain from providing a thorough explanation on how the signals sent are arrived at, it could be argued that trading in accordance to such signals involves some degree of blind trust in the company or individual behind the issued signals. Having said that, there is none actually forcing the forex trader to actually adopt the signal since the implementation of the buying or selling decision ultimately rests with the trader and not the signal provider. Therefore, the forex trader, as the end user of the forex signal, maintains a high level of discretion as to whether to actually implement the signal advice or not.
Another issue to be kept in mind is that often the successful exploitation a received forex signal does not only depend on the actual quality of the signal and the good judgment of the trader, but also on the efficiency of the actually forex broker through whom the trader places the trade. This is particularly true in the case of news based forex trading signals, where acting quickly is massively significant and therefore you should ensure that your broker does not face any problems or issues relating to misquotes and slippage.
George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.