Every Forex trader needs as much help as they can get when trading and Forex Trading Signals are just one of the ways to get a leg up. Trading signals are provided by experienced investors to help guide you to making more successful trades. Here are the Must Know Forex Trading Signals for beginners.
What is a Forex Signal?
Forex Trading Signals provide suggestions on things like when to buy/sell a trade and the direction of that trade. They can also tell you when to make Stop Losses and Take Profits.
Trading signals are created by the provider using a set of technical indicators and rules which result in a set of recommendations. Some Forex trading signals are automated, and others are made by an experienced trader.
All forex traders use technology platforms where you can invest your money and trade, and many also provide trading signals to help you out.
There are also specific trading signal companies where you can pay to get signals, however, it is important to do your homework and use a trusted provider because you need quality trading signals.
One of the best ways to try out signals is to use them on a demo account first.
What types of Forex Trading Signals are there?
Every forex provider uses a signal system that is based on their preferences and methods, so no trading signals are the same.
Some trading signals are provided for free and others you will need to pay for, it depends on your provider.
There are however two categories of trading signals – Technical Analysis and Fundamental analysis.
Provides trade advice that appear on price charts, based on historical price movements, support and resistance levels using specific mathematical formulas and trend spotting techniques.
Technical analysis is better for identifying shorter-term price trends, so if you prefer a short-term forex trading strategy this will be good for you.
Is suitable for longer-term Forex strategies where the provider gives you an analysis of current events and the opportunities within them.
This involves understanding the impact the economy has on the forex market and currency pairs.
Fundamental analysis provides economic indicators from news such as inflation data, manufacturing output and unemployment figures.
Also, market sentiment and volatility can drive movement in certain currencies so understanding indicators like these is important.
What does a Forex Trading Signal contain?
Forex trading signals contain these elements:
You should get comments, charts and details about the recommended trade setup.
Details the currency pair that you should trade for example GBP/USD or BTC/USD.
This is the price/amount the Forex trading signal provider suggests you make on the trade.
Indicates the direction of the trade which will have a buy or sell action next to the asset price.
The take profit indicates the price at which your trade is closed automatically if the trade goes your way.
Stop loss is when the market turns against you, it indicates where your position will automatically close.
This shows the status of the forex trading signal – active, get ready and closed.
What are some of the most common trading signals?
The most common trading signals include candlestick patterns, Fibonacci indicator, head and shoulders pattern, divergence, triangles and wedges, Elliot Wave pattern, liquidity and hedging.
This consists of candles on a chart which indicate price movements on currencies.
Fibonacci retracement levels— grounded in the Fibonacci sequence—are horizontal lines that show where support and resistance are expected to appear.
Head and shoulders
The head and shoulders chart shows a baseline with three peaks – it portrays a bullish to bearish trend reversal indicating the end of an upward trend.
A divergence signal indicates a major positive or negative price move.
Triangles and wedges
These are longer-term patterns that signify the continuation of a trend and is often seen on weekly charts.
Elliot Wave pattern
This signal displays recurrent long-term price patterns. Shown in “waves” they indicate changes in investor sentiment and psychology.
Liquidity shows how active the forex market is – how many traders are actively trading and total volume trading.
Signals can be used to open additional positions protecting yourself against negative movements in the forex market.
How do I choose a Forex Signal Provider?
Research – do your homework.
Compare the many Forex signal providers as well as the signals given by your Forex Trading company or platform. Do they have a track record? What do reviews about them say?
You are looking for more detailed suggestions than just the entry price and Stop Loss / Profit Loss. Knowing what is behind the analysis is very important, so you must have access to supporting charts and market analysis.
Try before you buy
Always practice the signals on a trial basis to see how they work for you before trying out on live trades.
Because the forex market is fast and highly liquid, your signal is only good when used at the right time. So, make sure to react on the signal quickly or it may be outdated.
Where can I find Forex Trading Signals on MetaTrader 4?
MetaTrader 4 has a Signals tab which you can find in the Terminal window, they include many forex signal providers with graphs of their trading performance.
Why use forex signals?
Saves you time
Because researching and analysing is very time-consuming, signals are a way to get the information quickly because they usually use automated software that does all the work. Having said that it is important to not rely solely on signals.
Forex trading signals are considered reliable especially when they come from a reputable company and usually if they are automated using historical data and current market conditions that is not biased.
If you are a beginner and are unsure of how the forex market moves, you can rely on the forex signal as it is better than winging it on your own, however as you become more experienced, trading signals become an additional tool to help you as your own knowledge deepens.
The Cons of Trading Signals
- Signals do not guarantee profits, even if they do reduce some of the risks associated with forex trading.
- Some of the risks of using forex signals come from slippage or latency.
- Slippage is when there is a price difference between when a trade is actually executed, and it was supposed to have been executed.
- Latency can also affect the trade – this is the time it takes for a signal to reach the trader’s platform – where there is high latency the trade may be outdated by the time it arrives on the platform.
Is copy trading a signal?
While not exactly a signal, copy trading is when you copy the positions of another forex trader. This is a great way for beginners to start because you are using the experience of another trader which is very beneficial as you learn.
Not all Forex brokers provide copy trading so if this is a route for you then research brokers that offer copy trading.
These Must Know Forex Trading Signals for beginners will help you in the beginning stages of your Forex investing. But remember they are not a guarantee of your success so make sure you choose your trading signal provider carefully and get as much knowledge as you can to mitigate any risks.