What Are Trading Signals?
These trading signals are used by traders in the forex and binary markets to assist them in making crucial decisions about the trades they undertake. Depending on the trader’s strategy, there are a myriad of trading signals available. There are some that are offered free and other at a fee. Depending on the signals you go for, it should offer information on take profit and stop loss points.
Since money management is a key aspect in forex trading, test the signal services on a demo account before you can try it in a real money account. This will go a long way in making sure that your money is safe and hardly will you lose it.
The routine people are used to is receiving the trading signals on your email, phone or through text messages. This routine will assist in increasing your ability to track your trades and make sure that you will not loss any opportunities either by entering the market too early or too late.
It is important to understand that not all trading methods work with the signal systems. A trading method like scalping will not work with any signal system because of its time frame. A trade might have closed by the time you see it. This means that if you’ll use a signal system, you need to have a long trading time frame.
Does the Signal System Work?
Trading signals are different and they rely on the method of analysis used. In the market, there are two major methods of analysis used. There is the technical analysis, as well as, the fundamental analysis.
Technical analysis uses information from the market which includes past information about the prices and trend.
There is the fundamental analysis which is based on the current events and this analysis tells how the price action may be affected on the short run or the long run.
Automated computer analysis
This one assists one in getting the signals from an automated computer where an experienced trader feeds information to a computer that reacts and gives signals depending on the different events. One major advantage is that the system eliminates negative effects that a human psychology might bring an affect the judgement.
On the other hand, there might be a downside where human judgement might be required and is not present in the computer system.
Indicators Used in Forex Trading
Many forex trading signals are given on technical analysis. Different indicators are used so as to understand the market trends. Using the indicators, the signal provider will be able to determine the right exit and entry points of the market.
The different types of indicators are generated through:
Simple Moving Average (SMA)
The simple moving average of the currency is known directly from the charts of the currency. The buy signals will be established when the currency’s price moves higher the average line and the selling signal will be determined when the price goes lower than the average.
Moving Average Convergence & Divergence
This will establish the connection between two moving price averages, which is achieved by subtracting 26th day moving average from the 12th day moving average. There is a 9-day EMA which is known as the signal line and is plotted above the MACD. From the signal line, one is able to determine the signal points of entry and exit.
This indicator will establish the markets’ interest in a given pair. A rise in volumes will indicate the beginning of a trend.
This will show a change in the market trends. When a bands width is tightened, for a given currency, it will be succeeded by a quick change in the exchange rates.
Benefits of using Forex Trading Signals
No research is required
When you make use of the trading signals, you will not spend a lot of time researching on the entry and exit points of your trades.
A lot of research is used on understanding the market. To be successful in the market one will be required to study the currencies, as well as, the global economy. Even when you are trading a single currency, you will still need to study the economy of two countries.
Get the signals when they are relevant
When you do your own research, it might be irrelevant within minutes but when you get live signals, you will get the information when it’s relevant.
You get the time to focus on account management
When you are getting the live signals, you spend less time on research and focus on money management. This is truly what separates the profitable traders and those burning out their accounts. This way you get to balance out the profit and risks.