Forex trading requires skill. Experienced forex traders pay close attention to the news, politics, and trends. They know there are many things that impact major currencies, so it pays to be prepared. In the old days, an economic calendar and a good understanding of how the markets worked was essential. Today, many traders rely on forex signals to point them in the right direction. If you are new to forex trading, here is a quick guide to how forex signals work and how to make them work for you.
What is a Forex Signal?
Forex signals are recommendations for trades. They can come from human analysts familiar with the forex markets or from software or bots. For example, a trading bot might signal when a currency pair hits a certain price. FX signals provide very specific information. They tell a trader which currency pair to buy or sell, at what price, and when.
Most forex traders rely on a multitude of FX signals throughout the day. These notifications arrive in real time, so the onus is on the trader to act on the signal as soon as possible. Traders can pay forex signals providers to receive forex signals, or they can devise their own system of signals.
Manual Forex Signals
Manual FX signals involve a forex trader interpreting signals in real time, so he can make a profitable trade. This is, as you might expect, rather time-consuming. A trader must spend a considerable part of his day waiting for a forex signal giving him key information. He then must make a judgment based on that information. However, this is not a bad way to work. Experienced traders get a feel for the markets. They can often tell which way a market is going to move based on instinct, even when evidence suggests otherwise. This is how hugely successful traders like George Soros operate.
Human analysts can see things computer programs can’t, which allows them to make a judgment based on experience rather than statistical analysis; experienced traders don’t rely too heavily on analytical tools when making trades.
Automated Forex Signals
Automated signals come from software or AI bots. Traders use software programs to alert them to certain market signals. The trader usually tells the software what to look for, so he isn’t tied to his computer all day. Based on pre-programmed signals, the software will then make an appropriate trade.
It isn’t a fool-proof method and the system is only as good as the person who programmed it, but it does save a lot of time, effort and stress.
Investing in Good Quality Forex Signals
Forex traders can purchase FX signals online. There are many services that offer forex trading signals for a fee, but not all of this information is useful or even accurate. Before you sign up for a service that offers to provide accurate forex signals, make sure you can test it via a free trial.
Traders using a MetaTrader4 platform can take advantage of MQ4 signals. These are accessible via the Signals tab.