If you are new to Forex trading then ‘what a forex signal is’ would probably be at the top of your FAQ list. A Forex signal refers to an exact indication on whether to buy or sell a particular currency pair. The signal can be generated either manually or automatically. Normally in order to receive these signals, a trader has to subscribe to a forex signal service. However, you should note that due to the timely nature of these signals, they are in most cases communicated to the subscriber by RSS, SMS, and Email or via social networks like Tweeter through tweets.
In generating the signals, most of the available providers concentrate on providing signals based on either technical analysis while others prefer to supply signals basing on fundamental analysis of the forex market. However, fundamental analysis or price action method is currently being used by only a minority of the available forex signal providers as it is known to provide only long term trade ideas as opposed to the technical analysis that offers both short and long term forex trade options.
Types of Forex signals
As mentioned above, there are basically two types of forex signals that are existing currently; manually generated signals and automatically generated forex signals. Given below are a description and an explanation of what the two are.
- a. Manual Forex signal
The generation of this signal depends on a trader manually acquiring trade signals from a computer and making a decision on whether to sell or buy a particular currency. In this type of signal, the decision by the trader on whether to buy or sell solely depends on the trader’s interpretation which is time consuming especially if one has a busy daily schedule. In addition, this method requires one to have perfect understanding of the working dynamics of the forex market thus it is not the best way of generating signals especially if you are new to currency trading.
- b. Automated Forex signals
This kind of a signal is generated automatically by forex trading robots. With these signals, a trader has the ability or rather the possibility of trading your own strategy without the necessity of being in front of a computer. These kinds of signals are generated by real time forex trades and they are executed on real accounts plus they are automatically copied to the trader’s forex account.
What to consider when choosing a forex signal provider
There are a lot of factors to consider before settling on a given forex signal provider. Among the many factors include services like the provision of entry, stop loss figures for a trade on any number of currency pairs. Another is a forex trading history, which provides the number of pips plus also the provider should also be able to offer supporting graphs in addition to a short analysis of the graphs in order to assist you in making an informed decision.
Also, ask the given signal provider if there is an option of running a free trial and also getting audited results. Although, the above mentioned are some of the main features of a signal provider, not all of the available online signal providers offer the same. For that reason it is important for you to carefully go through the offered features if you want to be successful in the forex market.
Conclusion
The unpredictability nature of the forex market makes it a risky place to invest your money especially when you are new to currency trading. However, a good understanding of how these signals work could help you maximize your profits and the choice of a signal provider equally plays a vital role in determining your profit levels.
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