A key component to Forex trading is to setup and follow some trading rules. Successful traders argue that rules provide the necessary discipline required and avoid any emotions from affecting trading moves. Forex trading signals are buy and sell indicators for a currency pair produced after conducting technical analysis. They are used by many traders to enhance their performance either by generating them by themselves or by receiving these signals from other sources.
Many Forex brokers provide signals to their clients for a fee, but some selected Forex brokers even take the extra step and provide their clientele with free of charge Forex signals generated by professionals either through email, SMS alerts, or by simply displaying them on their website. There is also a variety of software (robots) to purchase from the market, and their developers argue that these are able to provide reliable Forex signals that provide market exit and entrance points.
The main benefit of Forex signals is to get insight on potentially better trades which otherwise would be missed by the trader. To find out just how ‘better’ they are, many traders apply those signals to a demo account to check their quality and performance and this is a good idea before deciding to risk their capital through a normal trading account. Another factor to take into account is the trading strategy that those signals are to be used for. For example, it would make no sense to apply Forex signals on a scalping strategy since the time frames are so tight and there would be no time to make the moves. Forex signals are suitable for longer periods, ideally for intra-day or intra-week time frames. It is also important to check whether these signals arrive at the trader’s time zone because they would obviously be of limited use if one would receive most of them during his good night’s sleep. Even though a few reputable Forex brokers provide Forex trading signals for free, some traders choose to purchase theirs from independent providers for a regular fee or per signal. Forex brokers in many cases have the advantage to back up their trading signals through customer service on a round-the-clock basis and reply instantly to any queries from their clients.
Traders who are skilled on technical analysis are able to produce their own Forex trading signals. There is a variety of indicators to assist in doing that and the most popular ones include the Moving Average (MA), Moving Average Convergence Divergence (MACD), the Relative Strength Index (RSI), and Stochastics. Moreover, the study of chart patterns, such as the Harmonic Chart Patterns, also enables the trader to get insights on the future direction of a currency pair’s price.
The Forex market is famous for its volatility and even disciplined traders may sometimes fall into the trap of letting their emotions dictate their trading positions. Forex trading signals are products of technical and fundamental analysis only and provide cold blooded buy and sell indicators. There are a few methods of testing their quality including comparing them to their own technical analysis calculations. But trusting them ultimately boils down to the trader’s decision.
by David Parker