The Forex market can be unpredictable. Even though thousands of trades are placed in it every day and its daily turnover standing at roughly $5 trillion is humongous, it can still be very difficult to profit from.
In reality, most of its participants do not even break even at all; instead, they lose! That reality stands in contrast to what the general media have made people believe about it.
The typical Forex ad often has a lad with wads of cash and a fleet of the most exotic cars all acquired from trading Forex. Sometimes, elegant blonde girls are added to the picture, too.
However, in actual fact, trading Forex for a living, for most, is not as rosy as that. What is even surprising is that for many, it has been a rocky path to penury. Many have put their life savings into Forex and gone ahead to take a few trades that went against them, so they failed.
Yours can be an exception if you use the right tools one of which is signals. In fact, signals have been helping many erstwhile failing Forex traders to become profitable ones.
What are Forex Signals?
Signals. What are they? Essentially, Forex signals are trade recommendations. It is like you, an expert analyst and trader with a proven track record of success, telling a clueless, newbie trader, “Buy the EUR/USD pair at a so-so price and close it at a so-so price.
To hedge against unexpected market moves, place your stop-loss price at a so-so price.”
That is it. Forex signals can, therefore, be defined as suggestions made by expert analysts and traders which are communicated to their subscribers to help them enter and exit the market at the right time, while also protecting them against unanticipated (and sometimes, drastic) market moves.
They are sent to traders in the form of alerts through many channels such as social media pages, email, and even SMS! It is, therefore, not uncommon to see pages on Facebook, Twitter, Instagram, and Telegram that are dedicated to the provision of Forex signals to client bases which they have built over time.
Types of Forex Signals
Forex signals have types. They are not all generated in the same way and their means of execution can be different, too. Also, their typology can be based on factors such as the agent of generation and the method of generation. Based on these two criteria, four types of Forex signals can be identified.
The agent of Forex signal generation can be either human or machine. Human analysts working with top investment banks, elite financial news websites, and high-rated research firms, have opinions on the directions of currency pairs from time to time.
These opinions can be made readily available, becoming a highly useful tool for retail Forex traders.
There are computer-generated Forex signals, too, known as automated Forex signals. These are developed by robots which analyse currency pairs using historical statistical data they have been fed with to predict the directions of currency pairs.
Finally, the other two types of Forex signals are the fundamental-based and technical-based ones, which are dependent on the means of analysis used in arriving at them.
Summarily, fundamental-based signals are developed through the consideration of economic factors that effect the demand and supply dynamics of currencies.
They encourage the trading of economic and political announcements. On the other hand, technical-based analyses are derived from the use of a wide range of tools such as indicators, chart patterns, and other techniques.
Forex Signals: How to Use Them
Even though the proper way of using Forex signals depends, to a large extent, on the specific type in question, every Forex signal has commonalities in their components and execution. For example, every one of them must have details such as:
- Specific pair/instrument: Which specific currency pair/asset class are you to trade? Is it the EUR/USD or the GBP/JPY? Or is it Oil?
- Status: Is the signal still on or it has closed? That is, when should you take the trade so that it can give the desired result? Is the signal active or closed?
- Action: What specific action are you to take on the pair? Is it a buy or a sell?
- Price: A standard Forex signal must have three prices: entry, take profit, and stop-loss. You execute the recommended action at the entry price, you lock in on your gain at the take-profit price, while you use the stop-loss price to protect yourself. Perfect.
- Commentary: This is optional. In fact, many Forex signals don’t have them. Commentary is just a brief explanation and clarification of the particular recommended trade.
Signal services do not have to be complicated. In fact, if a signal service is complex to use, then you are using the wrong one.
For that reason, you might want to change it. 1000pip Builder provides the best signals and you should sign up for their membership here.