What are forex signals?

Stella Taylor

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Forex signals have become very popular in recent years, helping traders make risky decisions on their trades. They are trade alerts instructing traders to perform a buy or sell action on a specific currency pair. Accurate forex signals help traders of all backgrounds to spot and take advantage of good trading opportunities. This way, new traders can minimize losses and turn them into profit, while more experienced traders can maximize profits and improve their trading performance by using a second professional opinion.

A trading signal includes a level of risk and doesn’t include the leverage, which is the trader’s decision to make, based on their money management rules. Expert signaling services take into consideration a number of factors before providing subscribers with trading ideas to buy/sell at a specific price. There are different types of forex signals, some are offered for a fee and some are free while others for a fee. Traders are advised to try out different signal providers to decide which one offers the most accurate forex signals and are most compatible with their trading strategy and funds available.

forex

What are forex signals?
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What do forex signals include?

Forex signals are a set of instructions sent directly to the follower, informing them of what currency to buy and at what level. Although, that doesn’t count as a full signal, since a forex signal will typically contain the following information:

  • Forex Pair – The symbol of the currency pair instructed to trade such as EUR/USD or GBP/USD.
  • Entry Price – The price where the forex pair was trading at the time the signal was sent out to followers such as 1.1055 for EUR/USD. This is the price where the trade was executed and followers should open the trade as close to the entry price as possible.
  • Action Buy/Sell – The action to trade comes in the form of buy or sell alert which is displayed together with the forex pair. Followers are expected to execute the trade in the direction of the buy/sell action.
  • Take Profit TP Target – This is the next instruction which should be included in the signal, instructing followers of the target price where to exit the trade. They can place TP on their platform to be triggered automatically when the price reaches that target. Although traders can leave the trade open in case market conditions are favorable, it is recommended to place a take profit order with every trade you open, to lock in your profit when the forex pair reaches the TP level.
  • Stop Loss SL Target – The SL target is a very important instruction sent with the signal, protecting traders from losing their funds completely in case the market goes the opposite way.   This is the suggested price where the followers can exit the trade if the market goes against the suggested action. It is advised that traders place a stop loss order when opening a trade at all times to protect their capital.

There are signal providers who have additional signal features, helping traders prepare ahead for the trade, such as Get Ready signals. They point out forex pairs which have a good chance to open a signal on, although not all are executed. Others include Closed signals, which show the recent signals’ history or active signals which traders can still follow. Trades can close automatically when one of the targets is reached, or manually by the trader.

Types of forex signals

Forex signals are based on trading strategies and with so many trading strategies out there, there are many types of signals corresponding to these strategies. Besides, they can also depend on the service providers, so there is a variety of signals to choose from.

Free Vs Paid – Depending on the signal provider, trade instructions are made available either for a fee or for free. There are some good forex signal services for free, although the experienced traders offer their services for a fee which at times might be expensive. They should both display a history of their most recent signals history and traders should go through a trial period before subscribing with a signal provider.

Long Term Vs Short Term – Similar to forex trades, signals can be long term or short term, so both types of traders can find the signals according to their preference. Long term signals have larger TP and SL targets, which means that the risk and reward targets are larger, therefore it is advised to use less leverage. Short term signals are for day traders with a smaller amount or risk and reward involved.

Manual vs Automated – Manual signals are the most common issued by experienced forex traders. Such decisions are based on fundamental or technical analysis, but accurate forex signals use a combination of the two, which increases the odds of reward. Automated forex signals are generated by algorithms/software which can be bought from developers. They are based mostly on technical indicators and statistics and the strategies are backtested; therefore, they include no human emotion in making trading decisions.

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