New forex traders often use trade signals, often based on technical analysis to help them determine the best time to buy or sell a specific pair.
What are forex signals?
When trading currency pairs on the foreign exchange market, forex traders often use trade signals to help them determine the best time to buy or sell a specific pair. Often referred to as forex signals, they are usually based on technical analysis of price charts or news events and can be provided by other professional traders or by automated pieces of software such as Expert Advisors (EAs). These signals are often provided via email, RSS feed or by instant message, as their time-sensitive nature means they must be acted upon quickly.
Types of forex signal services
As online forex trading has grown in popularity so has the number of trade signal services available. From professional traders providing forex signals for a price, to online services that provide a bundle of trade signals from various providers for a subscription fee, forex traders are presented with a multitude of options.
Trade Signals from professional traders
Those that are less experienced in online trading will often seek the advice of more professional traders that have a greater knowledge of the financial markets and how they work. Outside of mentorships, coaching and online webinars, some professional traders also offer to provide forex signals that others can use as indicators of when to buy or sell certain currency pairs, but for a price.
Subscription-based forex signals
There are various paid services online that traders can also register for to receive frequent trade signals for a range of currency pairs. Services such as these often aggregate forex signals from a number of providers and systems in order to offer forex traders a more detailed outlook on how the market may be moving and when is the best time to place a trade. These types of services often operate on a subscription model, promising a certain number of trade signals over a specified timeframe for a weekly, monthly or yearly fee.
Trade Signals from Expert Advisors
Expert Advisors, otherwise known as forex robots, are pieces of algorithmic software that are coded to identify specific indicators or situations in the market and provide trade signals that can be acted upon. EAs are installed on trading platforms, such as MetaTrader 4 (MT4), and can be coded to provide forex traders with notifications of new market opportunities to trade or they can automatically act on the opportunities without manual intervention, opening and closing trades while following a specific rule set. Forex traders can code their own EAs or download one of the many free or paid options available online.
Problems with forex signal services
Although forex signals can often be beneficial for new traders that are looking for indications as to when is best to place trades on certain currency pairs, these types of services also come with their share of problems.
Many of the signal services available to forex traders online often provide trade signals for currency pairs that are based on historical or past performance. Although analysing historical price action to determine future direction is common practice in the industry, past performance is not a guarantee of future action. As such, the accuracy of forex signals can sometimes be questionable and traders should avoid planning their investments solely around such indicators.
Traders will find a number of forex signal services available online and these can vary wildly in price depending on the provider. Although some trade signals can be found for free, those that are considered to be more accurate by the online trading community can often prove a sizeable investment. This is especially true for new forex traders who may just be testing the waters, as it can be difficult to justify the cost of a signal service that is more than your current trading account balance.
As in any popular industry, there are always those looking to take advantage of the unaware and scam them of their hard-earned capital. Many traders, both new and experienced, have at some point fallen victim to a fraudulent signal service provider touting ‘get rich quick’ or ‘over 90% return’ systems. Although highly regulated, scams remain a part of the forex trading industry and participants should remain vigilant at all times. If something seems ‘too good to be true’, odds are, it is.