Do Forex Signals Really Work?
Identifying the right time and price to trade a currency pair is always a mind boggling task for any trader because it is one of the key ingredients for successful trades- forex signals emerged as a solution to that daunting problem. Forex signals are suggestions, recommendations, or trading ideas about the ideal time and price a currency pair can be traded.
This trading instrument is a blessing to beginners because it gives them valuable information while they are finding their way around the forex market. For experienced traders, using forex signals to expand their arsenal and get more opportunities to make successful trades. With the growing popularity of forex signals, traders, especially beginners, are left wondering if it really works and whether they should make it a component of their trading strategy. With that in mind, here’s what you need to know about forex signals to help you decide whether or not you should consider them.
How do Forex Signals Work
Forex signals are typically generated by an automated robot or a human analyst. Signals created by robots are referred to as automated signals and they are made available by experienced traders and code developers. When creating an automated forex trading signal, these professionals create functional algorithms that recommend accurate trade ideas by using technical indicators to examine previous trade data. Apart from technical indicators, some economic indicators may be included when coming up with algorithms.
The advantage about automated trading signals, is that it reduces the place of emotion in trading and executes trades quickly based if the market conditions for executing a trade have been met. The downside is that the actions taken by these algorithms do not take into account the volatility of the forex market. When unexpected factors appear that can drive the price of a currency pair up or down, a trader may end up losing potential profits or incur losses.
The second type of trade signal available for traders is the manual forex signal. This type of signal is created by market analysis done by human analysts or professional traders. Like the automated trading signals, trade recommendations are generated based on the data gathered by technical indicators and fundamental analysis of the market. The benefit of manual trading signals is that they take account of market fluctuations, market sentiment, and the volatility of the forex market to offer traders a better chance of making profits.
The profit targets for manual trading signals are larger and the signal providers can manually control the signals depending on how well the trade is going. When deciding on the type of trading signal to use, you can split the signal providers into free and paid services based on your strategy and goals for trading. According to learnworthy, If you wish to reduce cost and still get the best forex signals, search for signal providers that charge little to no fee for access to all their services as there are free versions that only grant you access to limited information. Most of the paid versions charge a fee depending on the number of signals you use or can charge a flat fee for a certain period of time.
Since forex signals are only valuable if they are used at the right time, signal providers send across their trading recommendations to traders through email, SMS, tweets, RSS, on their official website or through any other medium expected by traders.
Benefits of Using Forex Signals
The popularity of FX is rapidly growing and traders are turning to it because of its potential to increase their account balance and profitability of their trades. Some of the benefits of using forex trading signals are:
- It answers pressing questions of what to trade and when. Traders spend hours looking at news, and market action to determine which currency pair to trade and what price they should buy and sell it at because it is one of the fundamental elements needed to make trades and missing the mark can be costly to traders.
To avoid spending hours on research, especially for those that take FX trading as a part-time venture, traders turn to these signals for accurate answers to their questions.
- These signals are best for those who don’t have the knowledge or time to do technical and fundamental analysis. Even experienced professionals in the field, will admit that learning technical and fundamental analysis is tricky and you have to take some time to hone your skills to have any chance of doing it properly; but not everyone has the time to hone their skills and beginners who want to enter into the forex market as soon as possible, may not have the requisite knowledge of technical and fundamental analysis. Using forex signals is a great solution to such problems.
Forex signals are created based on fundamental and technical analysis done on the market along with other factors which means that you may need to do little to no analysis of your own before getting started. This way, you can make successful trades and use the opportunity provided to fully understand the principles behind fundamental and technical analysis.
- It saves time. Apart from making analysis and research less time consuming, you are also saved from looking at patterns, analyzing charts and graphs, and pouring through every market news before making a decision. Plus, since signal providers send their trade ideas during fixed times, throughout the day and you don’t have to spend time in front of your laptop waiting for the appropriate time to trade a currency pair. Depending on the medium used by the trader, you can receive these signals on your phone.
- Signals help to confirm your own research. Using trade recommendations developed by experts is a great way to check the validity and profitability of your strategy and research. For instance if you predicted the entry and exit points of a trade, using a good forex signal can show you how accurate your analysis was. With this information, you can pinpoint your mistakes, make more accurate predictions, and perfect your trading strategy.
- It provides support from professionals. As a beginner, there is nothing more important than having the right foundation for a successful trading journey and having support from professionals is a good way to get started. When you start, you can use the signals to make most of your trading decisions and figure out what factors these professionals look into when making winning signals and how you can join the class of successful traders.
Characteristics of Good Forex Signal Providers
The presence of the internet makes it possible to find anything you want and there are tons of forex signal providers but not all of them are credible and searching for a trustworthy forex signal provider takes some effort because you want to get the best value. For you to know a good forex signal provider, they must meet these requirements:
To determine the reliability of a provider, look for reviews and feedback given by other traders and their social media presence. Reliable providers will receive the support of the trading community and lots of positive feedback on their signals.
The signals must clearly define the entry and exit points and they must clearly recognize the presence of risk in the forex market rather than promising large profits that will not be gotten. If there is a website, it should contain all the relevant information a trader needs to know about the providers and what to expect.
- Accurate timing
Sending random signals doesn’t benefit traders because signals are useful if they are sent and used at the right time. A good signal provider should have a means of alerting you as soon as the trade recommendation is published. Also, these signals must be sent at hours when you are most active. For instance, if the provider sends out signals during European sessions and you trade during New York sessions, that provider may not be the best for you.
- Suitable for different devices
You should be able to receive the signals on any device especially on your smartphones because they are always with us. Nowadays, most forex platforms allow you to trade easily on your phone and you can use the signals to take actions immediately meaning that you don’t have to give up any profitable trading opportunity.
- Good past performance
Some signal providers will provide information about their performance on their website to appear trustworthy and transparent and it is advisable to go through this information. Check their information over a long period of time and see how its success level over that time
Doing your research based on this criteria, gives you an idea of whether or not you should proceed with a forex signal provider.
Are Forex Signals Good for Me?
This depends on your capacity as a trader and ambitions. If you are new and have little knowledge of the market, getting forex signals is a way to make profits as you learn your way around the market. You can use it to confirm your analysis and discover what makes experts successful. For professionals, this allows you to improve your profit making abilities and develop your existing abilities. Also, if you want to make profits as soon as you can, using forex signals is the way to go.
Always remember that forex signals are not a guarantee for profitable trades and that you should feel confident in the signal you’re using.
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