FOREX Trading Signals

FOREX Trading Signals

How do you avoid having to invest hours of your time monitoring the FOREX markets? Simple, you make use of trading signals.

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FOREX Trading Signals

In addition to investing money, one disadvantage associated with FOREX trading is the investment of personal time equired for a trader to constantly monitor the international markets for the most advantageous entry and exit points.

But, that's no big deal. After all it's possible to sit in front of your computer monitor for hours just watching the markets. Of course, since FOREX markets are all around the world, normal "working" hours are not going to necessarily going to be your normal "waking" hours. Without some way of catching the right and wrong times to trade, you will have to sit there 24 hours a day!

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Of course, you could use automated orders to help you. Orders such as limits and stops. These will allow you to walk away from your computer with the knowledge that your losses will be kept to a minimum. However, a disadvantage of this option is going to be that you may miss out on potential profits because your limit order kicks in too soon.

If you do not have the time to sit with your eyes glued to your computer monitor but still wish to create as much profit from your trades as possible, you should consider signing up for a FOREX signal service.

These signal services monitor and analyze the market for you and transmit their findings directly to your computer desktop, or email in-box. They are also capable of alerting you on your cell phone, ipad, or pager...if you still have one of those.

Of course, companies which offer FOREX signals do so for pay. It will usually be necessary for you to sign up and pay a monthly or yearly fee. Some FOREX brokers might offer this service as an extra which integrates into their trading software. You can receive signals as a popup on your screen or by the other methods described above.

There are usually only a limited number of currency pairs that are available for FOREX signals. Most services offer signals on EUR/USD, USD/JPY, GBP/USD, USD/CHF only. Specialized services may offer other currency pairs.

FOREX signals are primarily based based on technical analysis of market conditions. Most companies will use a combination of indicators to identify major trends as well as entry and exit points. These results are sent to the subscribers who then have the option of acting on them or passing. Some services will even execute the trade for you.

By means of a variety of technical studies, various types of signals can be derived from currency charts. The SMA (Simple Moving Average) indicates buy signals when currency prices rise above the average line. Sell signals occur when the price falls below the moving average line.

MACD (Moving Average Convergence Divergence) studies have a signal line that is used to generate a buy signal (above the line) or a sell signal (below the line).

Volume indicators are used to determine market interest. High volume (especially near the bottom of the market) can indicate the start of a new trend while low volume indicates investor uncertainty.

Bollinger Bands indicate potential changes in the market. Sharp price changes tend to occur when the bands tighten while prices that touch one band tend to go all the way to the other band.

Other indicators like volatility and momentum can be used to reinforce signals provided by other sources. Taken together they form a relatively reliable source of information about how the market is behaving.

Are signals a sure thing? Of course not, otherwise we would all be millionaires. Signals can give you good advice about which currencies to trade, but no signal service will guarantee their information is 100% accurate. Reputable services will show you their track record, however, and let you see for yourself how they have done in the past.

A FOREX signal service can cost anywhere from $50 to $200 a month. It's up to the individual trader to decide if the cost is worth it. Don't think that signals can take the place of trader education – they are advice, and if you don't have the knowledge to analyze the advice, you should go back to the books before using a signal service.

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FOREX Signals and Signal Services
Page Updated 6:26 PM Thursday 12/13/2012