Most forex traders use trading signals. With the help of signals, traders determine trading prospects at a certain point in time efficiently. This enables traders to react to a changed situation, taking assets out of the attack quickly. Or vice versa — to connect additional reserves to the promising positions.
What are forex signals?
Forex signal is the specific recommendation for a currency trade at a particular price over a specified period. Forex calls are popular with anyone looking to increase profitable trades and help both beginners and experienced traders.
Who provides forex signals?
Signals are generated either by programs — trading bots or people with experience, authority, and reputation. Software generators use mathematical algorithms: Fibonacci levels, stochastic curve data, information about previous similar market movements, etc.
What two main types of forex signals?
There are two types of calls — automatic and manual.
- When a trader uses automatic signals, he entrusts funds to the program to perform trading operations. The advantage of such trading — no need to analyze and control the market and make transactions independently. But the risks of incurring losses are also high.
- When a trader executes a signal manually, he decides to run a trade operation, which the signal recommends, depending on the market situation. The main advantage — personal control throughout the entire trade and reducing risks.
Let’s look at the pros and cons of manual and automated trading signals.
Manual forex signals pros:
- Larger take profit targets
Manual signals that banks or companies use normally target hundreds of pips. When a manual signal is received, which seems to be going in the right direction, the provider might extend the take profit level and increase the financial gain.
- Fundamental analysis
Fundamental analysis can highly affect the financial markets. An analyst can find out the actual value of the trade and draw out a conclusion whether it is undervalued or overvalued.
- Better risk/reward ratios
Manual calls offer large profit targets, and their risk to reward ratio is also higher than automated signals.
Traders profit by taking the risk on a winning trade and increasing it. If you receive a manual signal for a trade and it goes in the right direction, the signal provider can increase profit levels. This will increase the financial profit.
- Human intelligence
Computers cannot match the intelligence of the human mind. Many experienced traders have a good know-how of the market. They can observe and implement better buy and sell opportunities, which a robot cannot detect in automated signals.
Manual forex signals cons:
It consumes time when you open the platform and execute the trade. Even if you don’t have to do all the analysis, it still kills time.
- Missed trades
Keeping track of all manual signals is unrealistic. Traders often miss good calls at night and during business hours.
- Market range
Many signal providers cover most of the market. Some concentrate on multiple currency pairs. If the provider only trades major pairs, you might be missing out on other financial instruments.
Automated forex signals pros:
- Building confidence
Automated signals increase the confidence of new traders in the market. Many new traders do not open positions because they are not sure about their analysis. Using signals, they match their research with the signal providers’ analysis and make a good trade.
- Execution speed
Automated trading is faster than manual. It gives a timely analysis and reduces the chance of missing any trade.
Trading robot covers up for you and keeps an eye on the market trends.
- Wide range of markets
Trading robots can give signals on various financial instruments.
Automated forex signals cons:
Trading robots are functioned to perform tasks under specific conditions. They cannot factor in fundamental factors, which is a weakness.
There can be a computer virus or any error which highly affects an account.
To benefit from calls, you need to know what role they play in forex trading. But it is also essential to find a reliable provider who does not manipulate results or make false claims.
How to choose a forex signal provider?
- Pay attention to the number, frequency and accompanying data of signals. Some providers give additional information about the origin of signals.
- Read about providers on the network and the forums.
- Make sure the forex trading signal service has feedback from the customer support team. You will receive answers to essential questions in time.
Which signals are better to avoid?
In the forex market, you can also find scammers. In order not to accidentally run into them, you need to remember a few safety rules:
- Free calls for replenishment of an account with a broker
Better not trust barkers who offer to open an account with a broker using a referral link, and in return, promise trouble-free trading signals. This is a standard scheme in which people agree with a broker to receive 20-30% of the client’s deposit. When such a client comes, the dealers get their share, and the broker drains the client’s deposition, from which makes a profit. The trader is left with nothing.
- Forex trading signals from forums
Don’t take signals from forums and social networks. The “providers” of such signals cannot bear any responsibility for them — you do not enter into any contracts or even register.
- Avoid the new suppliers
Avoid the couple of months projects. Focus on those suppliers who have been present in the financial forex market for at least a couple of years.
The losses from the unsuccessful trade will be your losses, not the dropping of the signal provider. We recommend using the trial period and choose a reliable provider. Forex signals can make your job easier and help you make the right decision, but using them can never be the universal way to work in forex.