Using forex signals as part of your forex trading strategy can greatly improve your potential for large gains and profits. Due to its time sensitive nature, signal orders are often communicated through emails, websites, text messaging, RSS, tweets and other somewhat instant methods. Therefore, it’s important to choose a credible, reliable signal provider that doesn’t make false claims about their performance and services.
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Forex Signals: Are they for you?
A forex signal is a trade alert for the currency market. Although the best way to trade the markets is doing your own analysis and making your own trade decisions, the constraints of daily life sometimes make attaining such a level of activity difficult, if not impossible. Forex signals can be a great way of benefiting from other’s skills and knowledge when the trader has the necessary capital, but not the time, to commit to trading.
Forex signals providers are quite numerous in the online world, and as the forex business keeps growing, it is likely that we’ll see many more of them in the future. With respect to pricing, there are three types of offers in the market. Some brokers provide their own free forex signals service to clients, but in the majority of cases the service is only for qualifying clients, in other words, you need to commit a certain amount of money to trading before this feature is made available. This amount is usually a lot higher than what a beginner would like to risk. The second type of forex signals service is provided on a monthly subscription basis, at an average daily fee of $5-10, or higher depending on the company. The third type of forex signals provider charges a one-time fee, or which the floor is around $100-150, but it can be a lot higher.
Forex signals can be divided into three groups, according to the strategy and the type of analysis used in deriving trade alerts.
News Trading: Arguably the easiest and most straightforward type of forex signals are derived from news reports and and data releases. Either by obtaining the report a short-time before the public release, or by communicating the release through special channels, cutting down the transmission time, and risk of delays, the signals service makes it posssible to exploit news events with greater ease and potential for profit.
Technical Trading: Technical trading with forex signals is very similar to using a forex robot. You have blind trust on the skills of the analyst or system supplying the trade alerts, and often have to follow the provided instructions without knowing much about how were obtained. Since the methods behind the technical strategies employed are trade secrets, traders have very little understanding of what they are doing.
Hybrid systems: The majority of systems in the market are either hybrid or technical. As the name suggests, hybrid systems combine fundamental and technical methods to create trade alerts which are then placed in a complex risk management plan to create profitable outcomes. There is a great diversity in firms in this category, which makes them more suitable, perhaps, for those with greater experience in the market.
Forex signals providers depend on their track record to attract clients, so their websites are often crammed with statistics and data from past trades proving how successful they have been over the testing period. Unfortunately, there is very little that you can do to check the truthfulness of the claims made. This, coupled to the high prices charged by the forex signals providers, makes forex trading through third-party signals a difficult task. If you do wish to test the usefulness of this approach, we suggest that you confine your choices to the very few number of well-established firms in the market. Keep in mind also the age-old adage about past performance being no indicator of future results. The competence, education, and experience level of those issuing the signals is what matters, not necessarily their past results.
Forex signals are probably not a great option for newcomers. Sorting out between the large numbers of providers in the market is a difficult task, and turning over the responsibility for decision-making to others at such an early stage is not conducive to attaining long-term profitability. Traders with a big war chest available to be spent on extra information, and those who possess moderate degree of experience in trading will derive the greatest benefit from using forex signals services.