Many new traders find that their inexperience in the market contributes to more losses than profits. This is often the reason why beginners will turn to the trading tool known as forex signals. Signals are alerts that are available from different foreign exchange service providers. They allow the trader to use these alerts, or signals, as indicators of when to enter the market so one does not have to focus too much on analysis. Of course, this does not mean you must not conduct any analysis or use signals as a complete trading strategy. To be an effective trader you must be able to complete efficient analysis. You must also have a strong understanding of forex signals before you begin using them.
What exactly are forex signals?
A forex signal is a notification sent to you by a forex signal service. This notification or alert is a recommendation of which trades you should trade and when you should trade them. Many of these signals will indicate the entry and exit points, but there are some services that offer the entry points exclusively. Having this service makes it much easier for a new trader to ‘learn the ropes’ of the foreign exchange market.
While these signals are very convenient, you must remember that they are automated and based on computer software. This means you will be required to provide the system with the trading information before it can offer you any signals. This can lead to losses instead of profits if the data you place is not accurate. There are various considerations you must make before purchasing a forex signals service.
Considerations of a forex signals service
The forex signals service is an incredibly popular one, but to ensure the service in question is value for money you must consider certain factors.
There are two types of forex services – those that are paid for and those that are free of charge. Some trading platforms present with an integrated forex signals service, however you must determine whether these are as effective as the paid services. Sometimes the free service is suitable for your trading style but you must consider if their signals are as sophisticated as the paid option. Although more costly, the paid option could be a more effective alternative.
It is important to consider the amount of signals you will be receiving per day. If your trading strategy calls for more than one set of signals per day you will require a service that offers multiple daily signals. The forex market is open 24 hours for 5 days per week so a trader can trade at any time making the amount of daily alerts a very important consideration.
It is highly recommended that you use a forex signals service that provides information on how the signal is formed. If you do not receive this information you will not know the source of the signals. Therefore you will not know if the information is inaccurate.