What are forex trading signals?
Forex trading signals are free, paid, or created systems with a set of commands that produce trading ideas for their users. One will be notified immediately if there is a profitable trading idea in the forex market through forex signals. Although these signals also exist in other asset classes, we’ll only be discussing the ins and outs of forex trading signals in this article.
With forex signals, you can assist by a set of rules and settings on whether to go long or short on a forex pair. Each system that manages signals is different from the way they operate and how signals are created.
The signals can either be manual or automatic, depending on your preference. They would also be based on technical analysis or even fundamental analysis of market-moving news.
You don’t have to do research on your own through forex trading signals and monitor the market at every hour your favorite session is open. Instead, you can simply wait for these signals to appear on your platform and monitor these positions from time to time without having the need to directly do the research yourself.
The combinations in creating a trading signal system are endless due to the number of existing indicators and chart patterns. Additionally, automated trading signals allow you to modify a few details, especially when a trade is entered automatically, such as important exit levels and entry conditions.
Trading signals in the past were only accessible by high-net-worth individuals and programmers. Now, even retail traders such as yourself can access, modify, and even create their own trading signal as long as you have the basic knowledge in trading.
It is important to note that signal systems are not only used in high-frequency trading, but they can be modified to be meticulous in selecting only a few of the best trade opportunities available for you.
How to read and understand forex signals?
Whether you’re subscribed to a manual or automatic trading signal, knowing how your trading position is executed is important. These would allow you to manually control both types of signals once they have been executed so that you would be able to monitor your positions with ease.
On manual trading signals, all details on your next possible trade are given to you immediately. These details will definitely include an open price, target price, and invalidation price. Sometimes, a suggested allocation and holding period are given so that you know exactly what to do with your funds.
For automated trading signals, because orders are immediately executed, you will be able to see all the details on your portfolio. The details listed are the same as what was mentioned for manual trading signals.
However, users of automated trading signals do have a degree of control. You can usually change the settings involved in making automatic trades. That means you can set your preferred risk and reward percentages in the form of allocation and exit points. Traders can even select what assets the system will specifically trade.
Depending on the trading signal you subscribed to, your forex charts might reflect real-time positions taken by your signals in the form of arrows placed directly above or below when the positions were opened. With this, you can easily see on the chart where you entered and exited a trade.
How to use forex signals?
First, you need to be willing to shell out up to a few hundred dollars if you want to subscribe to a paid trading signal. You also need to have a web or mobile application that you will use to receive the trading signals.
Nowadays, encrypted messaging apps such as Telegram are becoming more popular, but some groups still prefer using Discord or even just Facebook. If your trading signal is provided as an Expert Advisor, you would need to have MT4 or MT5 installed.
Traders that do not want to spend money to subscribe to a paid service may opt to subscribe to a free one instead. Although free trading signals are usually scams or do not provide adequate gains, some of the free ones are definitely helpful for traders.
Alternatively, anyone can create trading signals as long as they have the tools to do so. Through the MetaTrader platform versions, they can create expert advisors to develop trading ideas for them as long as they input a set of commands that the bot could follow. There are many more trading signal tools out there, but to use one effectively, you must at least be familiar with the basic trading strategies.
Through the alerts you’ll be receiving, you can use your new trading ideas to execute in the market, or you can also wait for better signals to arrive. It is ultimately up to you as to how you want to use the updates you’re receiving.
You can even use these signals to educate yourself in learning how to trade with a set system. You can observe how these signals are created together with the suggested entry prices that come with the alert. You can also study the other inputs, such as the allocation percentages, stop-loss points, and take profit levels so that you could trade on your own in the future.
Are forex signals worth it?
Although some traders prefer trading on their own rather than relying on signals, this doesn’t mean that forex signals are not useful. In fact, there are lots of reasons for you to use forex signals even if you have the experience of successfully trading without needing the help of others. We listed the top reasons below on why you might want to subscribe to a forex signal.
Trading alerts are not just a spoon-feeding service for beginners. In fact, you could learn a lot from these signals since these were made by professionals.
You could observe how they enter and exit trades based on certain conditions. For this, it is best to view the asset’s chart and overlay the trading signal to observe why it suggested a position. From the perspective of a user, it is easier to spot trends because you’re less emotional because the trade is already planned out for you.
Some service providers even provide commentary on their trade which you can use as educational material. It’s like having your own personal fund manager that guides you through trades. If you use their service enough times, you might even be able to apply what you have observed to your future trades.
Forex signals also save time, and thus, it is beneficial for all traders of different skill levels. When following signals diligently, you can choose not to do your own research anymore as long as you just monitor your portfolio’s value.
Through the knowledge and trading plans of experienced individuals, you simply need to enter a trade with the appropriate details and go about your day. This opens up so much time, especially for traders who used to spend hours finding and creating profitable trading ideas.
Saved time can be used for other ventures or even for leisure time for you to enjoy the gains from your trading signals. With a few clicks every day, you could possibly gain a profit that is enough to pay for the subscription fee of the signals.
Some traders use trading signals as a confirmation bias for their own trading ideas. Having the confluence of trading plans increases your chances of being right on trade. With higher hit rates, you free up capital that could have come from losing trades as well.
Additionally, with forex trading signals, you are given new and fresh ideas that you can use for asset diversification. This significantly lowers your risk, especially for those that solely trade stocks, indices, or commodities. Having a good signal provider allows you to allocate a portion of your funds without needing prior experience in trading forex.
This is especially beneficial, especially during bear markets where prices are either tanking or experiencing extreme volatility. You are given more chances to earn in a market that isn’t that bothered with economic affairs but instead thrives during those situations.
A simple search in Google will tell you that there are tons of trading signals out there for you to try. Although a lot are scams or perhaps don’t provide ideal profits, you have the advantage of having multiple choices to choose from.
No matter what your prior trading experience was, as long as you read reviews or even try multiple trading signals over a short period of time, you will be able to find one that suits your preferences in terms of profitability and risk. You may even be able to find one that employs a strategy that you believe in.
Lastly, legitimate forex signals are provided by professional financial advisors that have received education in business, economic, or other financial fields. You can be sure that they are finding the best way to serve you through finding profitable trading ideas.
Are free forex signals worth using?
Not all free forex signals are worth using for your hard-earned capital, but they are definitely worth a try. Being free, you get the chance to try them out without having to shell out cash which you can use instead to invest directly in the market.
It goes without saying that some of these free forex signals are just scams or ways to entice you to become a member of a trading group where you’ll be offered a supposedly better service. Some of the providers of these forex signals are also illegitimate and do not have the credentials to actually offer signals.
Once in a while, however, you will come across a free system of signals that is profitable beyond your expectations. But finding one is quite hard because those that profit from free effective systems would most likely not share the signals they use.
You can try to look for one by reading reviews to filter out your choices or even simply check out their profitability on different websites that rank trading signals.
Can I make my own trading signal?
Yes, you can. You either need the knowledge to program, or you could use a third-party software to just input your specifications for your trading system.
Creating your own system also needs extra steps, such as trying out multiple settings for you to achieve profitability. Not only that, but you should also improve it the best that you could through backtesting in different market conditions.
If, by any chance, you create a system that works only for a particular time and asset, then you could focus on either trying to improve that system’s profitability, or you could try to modify it to trade other forex pairs better. Remember that you also need to decide whether your trading signal will function automatically or if it would need your intervention.
It is also important to keep in mind that you are not allowed to sell your trading signals directly to other people, nor can you recommend whatever your signals tell you to do. However, it is allowed to find a broker or service provider that allows clients to share their signals for it to be legal. Through that method, you can earn from selling your signals, or you could also share them for free so that other people could benefit from them.
Are Forex Signals illegal?
Forex signals can be legal or illegal, depending on the provider of these signals. Basically, the legality of a forex signal depends if your service has employed a financial advisor that has the proper credentials. The credentials required to be able to recommend assets to purchase and sell depending on the service provider’s country.
Some of these credentials could be in the form of a license or certification. Other laws require you to join a financial firm that is regulated to handle clients for forex signals.
In places such as Seychelles and Panama, where forex is under-regulated, one could easily join a company or establish one to provide these signals. In the US, Financial Advisors are expected to at least have a Series 7 License or a General Securities Representative license.
Alternatively, those that are interested in providing signals can also opt to publish their systems or expert advisors and sell them to interested traders. Through expert advisors, you are not telling someone to buy or sell a certain asset specifically, but instead, you are giving the means for them to receive and create the signals on their own.
There are many scams or unregulated businesses out there that provide signals but ultimately end their recommendations with “views are not investment advice and should be used only for educational purposes.” This is an immediate red flag to those that would want to only receive legit services. Through that phrase, companies illegally get away with charging customers for their services in more than one way.
Some of these groups claim that they’re offering free signals, but only if you join their community. Although some of these groups actually do well in the investment scene, many are actually just membership bait.
Currently, there are hundreds if not thousands of forex trading signals being offered on Twitter, Instagram, and Facebook by other retail traders. These are more often than not illegal because they implicitly state to buy or sell a certain asset.
As a clarification, companies that do not abide by their country’s laws are operating illegally, but clients that use illegally offered trading signals are not liable under any law. Users are still able to access the services they paid for without any repercussions, but they must understand the risk they’re taking for following advice from unlicensed and uncertified individuals.
How to choose the best forex signal provider for you
In choosing a forex signal, you must first decide if you would want manual or automatic forex signals. Of course, if you choose manual signals, you get an expert’s view on the possible trade relative to bot-decided trades from automatic forex signals.
Through manual signals, you could freely agree or disagree with the opinion given by the financial advisor. Even if you won’t pursue the trade, you still gain the chance to be educated by a professional and hopefully apply your newfound knowledge to your future trades.
Automatic forex signals, as mentioned earlier, rely mostly on technical analysis based on a set of criteria determined by their programmed system. This means that other factors such as recent news and catalysts will not be accounted for.
Although these kinds of forex signals can be consistent at times, there is an off chance that it will encounter difficult market conditions that ideally need human intervention. If left unattended, it might cause losses for all clients that are still following the signals.
You also have to consider a number of different factors to increase your edge in choosing the right professional or profitable bot. One of these factors is the time frame in which you will hold on to your trades.
An ideal trading signal should have a time stop in a place that will suggest closing a position if it remained stagnant for a long time. When you close positions, you open up possibilities for new ones at the same time.
Depending on your preference, you might like a trading signal that prioritizes only certain assets rather than showing you all opportunities in the forex market. Profitable veterans claim that they only trade a few assets because only a few, such as the major pairs, show good volatility and liquidity.
Some trading signals also take their services to the next level by also providing suggested portfolio allocation percentages. Through this, clients will immediately be able to know how much they’re going to put in without having the need to calculate possible risks themselves.
There are a lot of traders that likewise appreciate suggestions for both stop loss points and take profit levels because they could set up their trades from the moment they enter them. With this, they won’t have to second guess themselves when planning a trade.
Lastly, a trading signal should know how to stop giving signals when the time is right. As ironic as it seems, there will be market conditions in which a signal will not function well. In these times, clients should be alerted that they might experience lower profits in return for a greater chance of not losing capital.
Manual and automatic trading
Trading signals are either manual or automatic. Between the two options, a trader has more freedom to control trade through manual trading because automatic trading automatically executes your trades once a signal is created.
Through manual trading, a trader will patiently wait for a signal and decide whether to take this opportunity or wait for a better one. With more control over their trade, they can do research first on the market and the asset before deciding on what to do.
Additionally, they could change a few factors in the trade, such as invalidation points and take profit levels. Allocation and holding period can also be adjusted with this kind of trading signal.
Automatic trading is like trading with a bot. This involves a trader, either you or a financial advisor from a service provider, making a system with a set of rules that automatically sets trades for you. This, of course, removes any emotional or psychological factors that one might encounter as a trader.
All of your trades will be immediately executed once an automated signal is received by your chosen broker. Although you will be one of the first to trade as a signal is made, you also won’t have the time to review your trade and check the current market conditions.
Time-based forex signals
With the variety of signals available on the market, you can select one that is ideal for your trading time frame and holding period. Based on the client’s preference, their trading signals could provide alerts for either long-term trading and short-term trading.
Forex signals for technical analysis
More than half of the signals are available for forex using technical analysis. This is because of the reliability of signals whether or not there is an economic event happening. Even the most professional traders claim that they can trade even when not knowing what’s happening in the financial world.
Through technical analysis, a lot of opportunities open up because of the multiple strategies that exist. The most popular strategy when trading involves the momentum of price change. Traders will be able to trade breakouts and breakdowns with the goal of capturing a strong and fast move that could give them hundreds to thousands of pips depending on their strategy.
Using these signals for lower time frames can yield consistent but small gains. When used on higher time frames, the gains become more significant because you’re trying to capture a bigger move.
With the use of signals, you will be updated immediately when an opportunity comes, and that means you get the best price possible for your trade. An ideal entry price leads to either lesser losses or bigger gains.
Forex signals for scalpers
Scalping is a strategy that also exists in forex, and it involves taking profit in small amounts but also risking a small portion of your portfolio at the same time. There are multiple benefits to scalping, especially when using forex signals.
One of those benefits includes being able to enter exactly at the moment when the signal is sent, which would provide you with a really nice open price for your position. As discussed earlier, having an optimal entry point will be better for your P&L.
Scalping can be used in any type of market because of its versatility. Signals for these will be triggered in both volatile and quiet markets. Big moves are not expected with this strategy but are a welcome sight when there are impulsive moves.
Markets can be irrational at times, but that is where this strategy shines. Through the accumulation of small gains with small risk, one could eventually grow their portfolio.
How will I know if a trading signal is effective and profitable?
To gauge the profitability of a trading signal, you can test out the signal yourself by using real money, or you could try backtesting the system if that method is available. Backtesting, however, involves having access to prior market data and the system of the trading signal itself. This is ideally more preferred than the next method, but it is quite difficult to find a signal provider that would help you in backtesting their own product.
Another way to gauge if their signals do work is to read reviews of previous clients. You would come across comments that might say that they have not been profitable or maybe that the signals they provide are too risky. Keep an open mind when reading these reviews because sometimes it might be just because of human error on the clients’ end.
Lastly, you could try out the trading signal yourself, even with a small amount of cash. That way, you won’t be risking that much, and you get to see the capabilities of the service you subscribed to. Once you’ve gained confidence in the system, you could add more money and leverage your advantage from there.
What expectations should I have when subscribing to a trading signal provider?
Although some trading signals showcase consistent and high-profit rates, this only shows a part of their performance. It is almost a guarantee that even the best trading signal in the market would have stagnant growth for a while, especially in a low volatility market.
With that in mind, you shouldn’t expect immediate gains. If a trading signal advertises an annual estimated profit of 100% per year, it might only earn a bit more than 8% per year, depending on your allocation.
Even if your trading signal has a high success rate, it is important that you shouldn’t put all your eggs on every single trade you take. Although these signals were made by professionals with years of experience in the market, the signals still have times wherein they will suffer from more losses than gains because of certain market conditions.
What you could do is to try to assess where your signals work the best. That way, you could properly allocate, especially during times where you think you’ll be right more often.
Additionally, you’re not expected to take every trade that the signal offers. You should only take the ideas that you personally agree with, especially when dealing with automatic trading signals. This is because sometimes, the system you subscribed to had not taken news articles or sentiment into consideration when it published a trading idea.
Whether signals you subscribed to are created manually or automatically, you should be aware that there will be days where no signal notifications will be sent. Rather than sending out a trading setup that has a low chance of being right, it is better to trade nothing at all for the protection of your capital.
Other services by forex trading signals providers
Aside from trading alerts, forex signal providers also have other services that are beneficial to the user. This could come in the form of performance reports, analysis of economic news, and access to an economic calendar.
For performance reports, they provide a profit and loss report that gives an overview of the outcomes of all of the signals they provided. With this report, you can filter out any asset at any time frame to see how often your signals hit target prices and stop-loss points. With this, you can assess your service’s total performance or its performance on a certain asset.
With in-house analysts specializing in finance and economics, your signal providers also give their own take on every important market-moving news that hits the industry. Sometimes, their analysis backs up the trading signals they provide to give more confidence to the trader.
An economic calendar is helpful for all forex traders and not only those that use trading signals. Being able to anticipate events as they happen will also allow you to anticipate if a trading signal will most likely be published at a certain time of the day. Being one of the firsts to actually trade an asset just as a signal is delivered is so important as it gives you a headstart compared to those that are unaware of a market event.
What are the best forex signal providers in 2021?
ForexSignals.com takes the title of the best forex signal provider of 2021. This is because it gives its clients the opportunity to seek advice from professional traders. It is known to provide useful information on the majority of the currency pairs in the market, and it has an easy-to-use interface. However, its monthly subscription fee is quite high. If you’re prepared to shell out $97 a month, then ForexSignals.com is the provider for you.
If you’re looking for a forex signal provider that offers its services for free, you should check out eToro. eToro has been made popular by its social trading and copies trading features. You don’t need to deposit funds to your account to be able to access the trading signal feature. It’s absolutely free, and you can even interact with other traders using the platform.
Can forex trading signals be used for other assets such as stocks?
Forex trading signals were specifically made to thrive in forex markets because it’s geared towards making profits even in the smallest of movements. However, there are some signals that work equally well in other commodities.
These multi-use signals should have trading strategies that involve either momentum trading or trend trading on higher time frames. Using conventional signals such as those for bottom picking will be less effective for stocks or indices.
Take time to understand how your trading signals work, or you could ask the developer of the product regarding the capabilities and limitations of their service.
Are forex signals illegal?
Similar to most businesses out there, some forex signal providers are legit while others are illegal. This is why you should do your research first before taking out your wallet and subscribing to a particular forex signal provider.
But when it comes to forex signals in general, there is nothing illegal about it. They are merely suggestions given to you by experts or other traders which you can either accept and apply to your trades or completely ignore.
Can you make a profit by using forex signals?
It is possible to make a profit using forex signals if you execute your trade at the right time. Since forex signals give sell-and-buy calls, it is your job to take that call and open up a position. Remember, the market constantly moves. If you miss the timeframe that was given to you by the forex signal provider, you can’t expect to make a profit using the call they gave you.