Forex trading signals is a way of trading where you get instructions to buy or sell currency pairs at specific times. Plus you get signals to tell you when to exit these positions.
This is an increasingly used method of trading as the internet increases its reach, and as more good forex trading systems are developed.
It has meant that you don’t have to spend time looking through charts each day, by yourself. And you don’t have to spend the upfront time to learn the rules of a system either.
Is it a legitimate way of trading?
Some purists would say that you must learn a system inside out yourself. No other way about it. But receiving forex trading signals or alerts is now a maturing area of forex trading because the providers of forex alerts are becoming increasingly transparent, in that you can analyse the historical results of their systems, and do your due diligence before deciding to trade with them.
There have been signal providers in the past, and even some today, who provide more of a "forecast" service where forex entry signals are given, but with no further instructions after that. For some this could be fine, but then you do have to make up your own system after that point, to decide how to set profit stops or trailing stops for those positions.
But now, various companies now provide forex entry and exit signals that are specific and complete.
When looking at forex signal providers, you should check out:
1. Their historical returns, usually shown as pips per month, or dollars per month based on a certain float.
2. Their drawdown figures to see that they are acceptable to you.
3. Their fee structure, and whether their fees have been taken in to account in these figures.
4. Also, getting more information to make sure that the returns they show are a) real and legitimate, and b) is based on a realistic float is an important part of your due diligence.
5. The times that the trades are taken and if they suit you.
6. The money management rules that are suitable for their systems.
7. At what point the historical returns were based on backtesting or were based on actual real time trading results.
You will of course have to pay for the forex alert services. For automated systems, there may be additional fees for this as well. So check the details of this out before you commit.
Forex Trader Alert Services: Checking Them Out
Here are some of the top selling forex signal providers to check out. They all have historical results documented, and broken down:
1. Pro Signal
2. All Forex Signals
3. FX Universal
4. i Forex
Therefore the advantages of trading with forex signals are:
1. You don’t have to spend time learning the rules of a trading system. This cuts out a lot of lag time from wanting to actually trading a proven system.
2. No need to spend time on a day basis going through every step of the system rules, which can take considerable time.
3. Will reduce human error, for example, if the trader analyses the market incorrectly, or interprets the system rules incorrectly, when trying to trade by himself or herself. This would improve the performance of the system.
4. You will need to still place the trades, but trading will take significantly less time, so that you can spend your time doing something else.
5. You can choose amongst systems which show their historical monthly returns, and hence choose a system which has higher returns, lower drawdown, and is more consistent. This is sometimes not possible when before deciding to buy an ebook or a course.
There are always going to be some traders that enjoy placing the trades and observing the trade as it progresses. For these people, forex signals may be suitable, and is the tool to have.
When trading a forex system with signals, monitor the results, and if the system behaves within the expected behavior of the system ,and proves to you that it is as profitable as you’d expected, then it’s a success. When you have proven this, then you can develop more trust in the system, be more familiar with the personality of the system, and will more comfortably continue trading that profitable system.
Some traders would trade a demo account with the forex signals first, before live trading.
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