An investor may need to spend hours on the computer to study the complex and continuous currency movements. Although applying stop loss limits can give you some leeway in terms of losses, it can also take away profit making opportunities in case stop loss orders get executed earlier. This is where Forex signals come to the rescue.
What are Forex Signals?
Forex signals are buy and sell indicators that alert investors of lucrative or defensive entry and exit points. These Forex signals are generated by professionals after they have conducted thorough technical analyses and sent to investors through email, pager, cell phone or even “pop-up” messages. They inform investors of any impending opportunity. Forex signals are usually a service that is available upon subscription. The service is also offered by brokerages as part of their Forex trading software.
Forex Signals Advantages
These indicators are especially useful for those investors who do not have sufficient time to study the movements of the currency market, but still wish to participate in the market. These signals are also useful for those who wish to make use of profit making opportunities that might present themselves while they are not actively trading.
How do Signals Help?
With the help of Forex signals, investors are immediately informed of buying or selling opportunity that may have arisen due to constant currency movements. With time being a critical factor in Forex trading, delayed information or action could result in substantial losses.
Moreover, with the help of Forex signals, investors can identify entry and exit points with higher precision. This helps investors generate better profits. Investors can also avoid missing out on a big opportunity or getting delayed in entering into a changed trend with the help of signals.
Selecting a Forex Signals Provider
Since so much depends upon receiving an accurate signal, it is essential that you select a dependable provider. To make the correct selection, you must focus on the quality of signals generated by the provider in the past. While some providers may be using more traditional technical analysis, others may use proprietary methods. The right FX signals service to use would depend on various things, including a trader’s personality, trading plan and exit strategy.
Various Signal Indicators
Most Forex trading signals are generated on the basis of a technical analysis of the market, which uses several indicators to recognize market trends. With these indicators, a signal service provider identifies possible exit and entry points. All the information is sent to traders who have subscribed to the signal service so that they are informed of every move and can make trading decisions.
There are several types of indicators through which signals are generated:
Simple Moving Average (SMA): The SMA of a currency is determined directly from currency charts. Buy signals are generated when the price of a currency moves above the average line, while sell signals are sent when the price dips below the average.
Moving Average Convergence Divergence (MACD): This indicator reflects the relationship between two moving price averages and is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA, called the “signal line,” is then plotted on top of the MACD. This signal line acts as a trigger for the signals.
Volume: This indicator depicts the market’s interest in a specific currency pair. A rise in volumes is indicative of the start of a new trend.
Bollinger Bands®: This indicator reflects changes in market trends. The tightening of a band’s width for a specific currency pair is generally succeeded by quick changes in exchange prices.
Since the success of a trader is dependent on receiving high-quality Forex signals at the right time, the selection of a reliable signal service provider is critical. easyMarkets offers a VIP SMS Alert Service that helps you remain in touch with the market and receive vital information even when you are away from the computer.