Forex trading signals are signals for traders which suggest to purchase or sell currencies at a specified exchange rate.
FX signals use time series analysis of price trends, which make regularities visible. From these, conclusions are drawn on trading signals. By means of technical analysis such as chart analysis, analysis of support and resistance, trend lines, relative strength indicators (RSI, MACD) and stochastics, trends and signals are evaluated and defined. The system behind Forex trading signals is based on approaches based on trend or breakout strategies, as well as the swing trading. In order to make the statements made in advance more precise, financial specialists, mathematicians and programmers have developed appropriate software, which monitors the various currency markets and examines and evaluates them. In addition, the signals are tested by the providers of long periods and different phases of trends. This enables traders to use such signals for successful Forex trades. Forex brokers use the software to indicate traders low entry prices at which they can buy or sell currencies. All major currencies are considered.
The signals are presented to the user in a simple form and are partly explained with background information. This information discusses economic backgrounds as well as current chart technical developments. The Forex brokers update their FX signals to the prevailing market conditions.
How Does Trading with Forex Signals Work?
In order to make investments in the Forex market less risky, it is helpful to make use of the knowledge of experts. This is why Forex brokers are giving out recommendations and their knowledge about the possible course of further developments in the FX market. By using trading software, also traders can transmit signals to their own Forex broker and thus carry out automatic trades (Forex Auto Trading).
Generally, there are different time frames for Forex signals, which can be requested by the investor. Accordingly, for intraday traders buying and selling signals are sent several times a day, while day traders receive them once per day. There is also the possibility to be informed every week. The programs can therefore supply the signal depending on the type of trading.
Forex brokers usually send news about the latest developments at the beginning of a trading day to their subscribers, via email or SMS. This gives the trader a brief overview of the current global financial situation. With the recommendations for good opportunities in one or more currency pairs, the investors can make their own decisions about the next actions. The usually included stop-loss and take profit orders and the display of various milestones of the market are also helpful. Without spending a lot of time, investors can exploit profit potential.
A Forex signal which is passed by the FX broker could look like this:
EUR / USD short at 1.4450, SL at 1.4470, valid for 6 hours.
Accordingly, the investor places a limit order with his broker, which opens a short position in EUR / USD, once the market reaches the rate of 1.4450. After that everything is fully automated: because limits are set, the profits can be generated and by the integrated stop-loss order the losses should be limited.
What are the Advantages of Using Forex Signals?
Not every investor has the knowledge or time to make independent technical or fundamental analysis. Yet he wants to use the Forex market to make profitable investments. To give this group of people an advantage when trading currencies, Forex brokers provide trading signals. By using special software and by their experience, brokers can make better conclusions about price trends and pass these signals to their customers. Investors can benefit from the foreign exchange market without having to constantly sit in front of the computer and are not constantly exposed to the stress of having to gather information and interpreting it.
In particular for beginners, it is difficult to filter the information and draw the correct and appropriate conclusions from the multitude of information from the technical and fundamental analysis. In this case, it is recommended to use the expert knowledge of a Forex broker in order to minimize the risks of losses.
In general, it is possible to have a better risk and money management with the help of Forex signals. These can generate profits, because the trader invests in a controlled way in the market. With the help of brokers, which supply tested signals, more accurate predictions about future developments can be made. In addition, traders learn from these signals directly by better understanding current trends. In summary, Forex signals often give their users an information advantage over other market participants.
