Trading Signals: Do You Need Them?

In forex trading, many of the transactions you perform are
dependent on market trends and how the market behaves.
This is why in order to survive and make use of your
presence in the forex trading market, trading signals are
exchanged. These signals help investors, traders and
brokers to observe the market, assess its performance and
make sound decisions.

What are forex trading signals?

Forex trading signals are tips and recommendations about
whether to buy or sell or liquidate given by a third party.
This party could be your broker, trader, analyst,
brokerage company, etc. The signal can be a single
indicator or a group of indicators, including breakouts,
envelope patterns, stochastic lines, Fibonacci levels,
oscillators, currency pairs that are almost at moving
averages and support and resistance levels, among others.
Forex trading signals can vary depending on the source and
they also follow certain market patterns and trends,
depending on the demand and supply of the world's major
currencies.

Since there are many indicators to watch out for, it is
important for many investors to rely on more experienced
forex brokers for reliable trading signals. Of course, the
more seasoned investors can always try to get a feel of the
market by themselves just by watching the trends, but there
are so many indicators that it's sometimes a lot easier to
rely on trading signal services. Besides, trading signal
providers have to perform detailed study of the markets and
make technical analyses of whatever operating forces come
into play, something that many investors don't have the
time for.

Where are trading signals derived from?

The currency chart is one of the sources for technical
studies and market analysis that lead to trading signals.
They include:

Simple Moving Average (SMA) – when the moving average line
is surpassed by currency prices, this is a buy signal. If
the price goes below the average line, it's a sell signal.

Moving Average Convergence Divergence (MACD) – uses a
single line to indicate a buy or sell signal, depending on
whether the line is above or below the average line.

Bollinger Bands – these point to possible market changes.
When Bollinger bands tighten, you can expect prices to
change sharply.

Volume – a high volume may signal a new trend. A low
volume means uncertain times ahead for investors.

There are other indicators such as momentum and volatility
that are often used to help reinforce trading signals
obtained from many other sources. If you study them in
relation to one another, you'll have a pretty much reliable
information source on the behavior of the market.

What kind of currencies is being offered by trading signal
services? Most forex signal services offer trading signals
on USD/JPY, EUR/USD, USD/CHF and GBP/USD. However, there
are also services that provide specialization in other
minor currency pairs.

Is the service for free?

Companies who offer this service charge a small fee, often
as a monthly or annual subscription. Sometimes, it may be
included as part of your subscription to a Forex account.

I want to sign up for a trading signal service. Is there
something I should be wary of?

While there are legitimate businesses that offer this
service, expect to find plenty more that run a scam. Learn
the basics of how the forex trading system works and try to
understand how indicators are used to come up with trading
signals. By having a background on forex trading, you will
not be at the mercy of an unscrupulous broker.

If you'll be using a trading system, find out about their
track record. This will show you how successful or
unsuccessful their system is. If the system offers a
hypothetical record (what could have beens), don't trust
their figures. Always ask for the real record as this will
be a good indicator of their performance. It's also a
warning sign if the creator of the system does not use it
himself.

You should know about fees and charges well before hand and
when transactions with trading systems and signal services
have begun, there should be a clear indication of which
fees you have been charged.

In order to ensure trading signals are maximized, it's best
to ensure that you obtain trading signals on a daily basis.
Remember that the currency market can be quite volatile
and small changes can make big impacts on your investment.

Do you need forex trading signals?

It's not easy to learn the forex trading system and taking
everything about it to heart requires time and patience.
If you don't have both, it may be best for you to try to
rely on trading signals but make sure you work with a
reputable and reliable company. It's your money, after all.

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