As a trading novice, you should not take a short cut. Instead, you should be more interested in learning the skills. Forex trading is a skill. To become a successful trader, you need to understand the Forex market. The more time and dedication you put, the better you get.
You would have heard about Forex signals and their providers. Although mastering the Forex market and Forex trading should be your aim, you can take advantage of Forex signals anyway.
Here is a comprehensive guide to Forex signals and how you can benefit maximally from them.
Forex Signals 101
What are Forex signals? Forex signals are trade recommendations. They are suggestions of which trades to place, when to enter and exit them, and how to manage them for maximum profitability. Ideally, they suggest the price at which to enter and the price at which to exit. Also, they usually include stop loss to effectively manage risk on trades.
Forex signals are provided by either a human or by a robot. Human analysts use different strategies to analyse the Forex market to arrive at correct signals. However, automated signals are generated by robots. Also, they can be provided by brokers through their social trading networks. Large banks, pension funds, hedge funds, and some websites also provide automated Forex signals. The MQL network is also another source of automated Forex signals.
No matter the source of those signals, all Forex signals can be categorized into two.
The Two Categories Of Forex Signals
There are two primary categories of Forex signals. Signals can be either fundamental or technical. The difference in the way of approaching the market accounts for the two categories of signals.
Fundamental signals are the trade recommendations that are based on fundamental details of the market. Specifically, fundamental Forex traders are the category of traders that are all about news, economic precepts, and geopolitical considerations. Traders in this category see beyond charts; instead, they look through to see the events behind them.
Consequently, those traders look at fundamental information such as interest rates, Treasury International Capital (TIC) data, and the Consumer Price Index (CPI). Also, they observe stock market performance, the balance of trade, crude oil futures, and the general media. They do all these to determine the performance of the economy of a country and the consequent effects on its currency.
Summarily, they use all these data to discover how they affect the demand and supply of different currencies. From those discoveries, they are able to establish informed trading signals for the Forex market. For the interpretation and confirmation of those signals, traders themselves should stay abreast of the economic calendar. Those economic events give glimpses into the future movements of currencies. Following all these to arrive at trading signals, though takes a great deal of analysis is not very hard. Most of those data already affect your life; you’ve just not been paying attention to them.
Some traders consider the technical approach to tackling the Forex market as contrary to the fundamental approach. However, we believe it is not. Instead, we believe the two are complementary and can be successfully combined to yield more potent trading signals.
However, the technical approach, which analysts use to generate technical signals, uses different tools to the fundamental approach. While fundamental analysis uses information such as interest rates, technical analysis uses charts. By studying the historical movement of price, technical analysts believe they can have a glimpse into its future behavior. They, therefore, use different patterns of chart and other tools to formulate their opinions about the market.
Principally, technical analysts use support and resistance levels to determine strategic positions of price. They rationalise that price always falls after it hits the resistance level, after a period of a bullish run. Likewise, they extend the same principle to the support level. Once the price touches the support level, it usually bounces in the reverse direction, after its bearish run. These two points are pivotal to determining turns in price.
To glean trading signals, this category of analysts combine the principles of support and resistance with candlestick patterns. They use different candlestick patterns, at these pivotal points, to ascertain the turns in the action of price. Technical analysis is especially essential in the management of trades. The stop-loss and take-profit values in Forex signals cannot be derived without the aid of technical analysis. Interestingly, most Forex signal providers belong to this category.
Why You Should Use Forex Automated Signals
Using Forex automated signals will be tremendously beneficial to your trading. Here are some of the benefits:
- Forex automated signals will save you time. By using them, you will dedicate less time to analysing the market and monitoring your trades. Consequently, you will have more time to do other things — your hobby, reading or spending more time with your family.
- Forex automated signals will also save you effort. You will not have to go through the process of formulating a trading strategy yourself. Therefore, you can decide to spend your energy on other aspects of your trading business.
- Lessened risk. Perhaps, this is the most crucial benefit of Forex automated signals. Forex trading is risky. Using those signals significantly reduces your risk. Therefore, they can increase the profitability of your trades.
- When you stick to one trading strategy, trading opportunities tend to be fewer. Moreover, your strategy might require you to stay away from the market when it is in a range. However, most Forex automated signals use multiple means of generating signals. Therefore, they tend to identify more opportunities for trades.
- Additionally, most Forex automated signals do not attract additional costs. In situations that they do, they are not usually pricey at all. So, you get a two-sided cost advantage by using them: more winning trades at a pocket-friendly price.
- Protection. Using automated signals for your Forex trading can protect your account by lessening your risks.
- Little to no cost. Forex automated trading signals are not costly. You can easily subscribe to a provider at a reasonable price. Yet, the value you get far outweighs the affordable costs.
- No complication. There is no complicated process about using them. All you need is a broker’s account and access to a trading platform!
- They are a veritable tool to use when you want to build your trading account in a short time. If you are starting with a small account especially, you can use them to increase your capital quickly.
Social trading, also known as copy trading, has a correlation with automated signals. It is an arrangement with which a trader can copy successful traders’ trades in real time. For both experienced and beginner traders alike, it is a convenient and reliable way of getting and using Forex signals. However, social trading is especially useful to novice traders since they do not know how to analyse the market yet.
As a novice trader, in the beginning, it might be tough reaping profits off the market. Indeed, the Forex market can seem haphazard to you, with no order. Inability to understand the market in the beginning can cause beginner’s loss, instead of luck. A series of losses can frustrate you, making you quit trading for good. Thus, you may consider social trading to add some clarity at this crucial stage of your trading career.
An experienced trader who wants to increase their capital can also take advantage of copy trading. Moreover, if you are an experienced trader who wants to learn new strategies to enhance your profitability, social trading may be worthy of your exploration. Besides, social trading is recommended for any trader, irrespective of their experience level, who cannot dedicate enough time to the market.
Many brokers offer the benefit of social trading. While it can be manual, automated or semi-automated, the automated form is most preferable. Notwithstanding, it is crucial you choose what you think is best for you.
Advantages of Social Trading
Social trading has become wildly popular. The popularity has mainly been due to the profitability of its adopters. It works and that is why more traders are joining its bandwagon. Among many, here are some advantages of using an automated social trading service:
- Social/Copy trading gives novice traders insights into the trades of experienced ones. They can learn to become better traders through this.
- It saves effort. When you subscribe to an automated social trading service, someone else does the analysis for you. You do not need to worry about much again.
- As a novice trader, if you cannot afford to dedicate much time to the market, then you should subscribe to social trading.
- Experienced traders alike can copy trades in the course of their market research. By so doing they get fresh insights into the market and discover the latest strategy that works.
- An essential advantage of copy trading is its flexible. You can use it to trade almost every financial instrument.
- Copy trading launches you into a community of traders. Instead of having lonesome trading experiences, you will then be able to assume a collective approach to the market. Also, it makes it easy to share ideas.
- It offers the arguably easiest way to get familiarized with financial markets for newbie traders.
Forex Signal Providers
Many companies and brokers provide Forex signals. Brokers that provide Forex signals do so either free or at a cost. Also, some may limit this service only to specific types of account. The paid package can be a one-time payment type. It can also be a subscription that requires daily payment.
One-time payment packages are usually more expensive than daily subscriptions. However, by using them, you usually get long-term access to Forex signals.
The kind of signal service that you will get from different firms will be different. However, generally, it usually includes performance trackers and is delivered in the form of SMS, email, and phone alerts. Usually, there is a live customer support service through the same channels. Those firms can also make available to their clients advanced market analysis tools.
Some Forex signal providers will only give you signals and leave you to trade yourself. However, those that base their services on social/copy trading may execute the trades for their clients, too.
Importantly, you should tread with caution when shopping for a Forex signal provider. Many make outrageous claims — claims that are too good to be true. Those claims are usually empty marketing gimmicks. A genuine Forex signal provider should be able to give facts and figures to support its performance.
Benefitting Maximally From Forex Signal Providers
The usefulness or otherwise of any Forex signal provider you subscribe to depends on the efficiency of your broker. The efficiency of your broker becomes extremely important if your signals are fundamental ones. This is so because news can change market condition rapidly. As a result, you will have to be able to act as fast as you can. However, if you regularly encounter technical glitches with your Forex broker, you would be missing out on many trading opportunities.
Also, to benefit maximally from Forex signals, you should learn to interpret them. There are some basic concepts that you need to know to be able to do this. You’ve to understand the concepts of support and resistance and different candlestick chart patterns. Understanding them will enable you to put the signals you get to the best use. And maybe, you’ll be good enough to detect false signals yourself.
Finally, whether you need to use a Forex signal service will depend on your individual personality and your trading plan. If you want to learn and master the technicalities of Forex, a signal service may not be necessary for you. However, if you do not have the time and effort to spare, it will be useful for you to subscribe to a Forex signal provider.
In the following, we compare the best three providers of Forex automated signals. You should go through the guide to choose the best for you.
The three are:
- MetaTrader Forex Signals
Forex signals on the MetaTrader trading platforms, MT4 and MT5, are provided through the integrated MQL5 signal service. You can sign up for a demo account or pay a signal fee on a live account. Any trade that the signal provider makes is also processed in your account. The signals can be free or paid.
The paid signals are associated with a monthly subscription and can be canceled at any time. Since this service carries a price, you should be certain that you really need it before you pay for it.
MetaTrader provides extensive statistics for each transaction signal. Therefore, you always have access to analyses for each trading signal provider. These analyses provide overviews of how those signals have performed over time, how long they have existed, their costs, and subscribers.
In choosing any Forex signal provider, of course, it is a good idea to choose one that has been consistently profitable in its performance and has existed for a reasonably long time.
MQL5 is a community of traders who use MetaTrader 4 and MetaTrader 5. It was established by MetaQuotes, the developer of the MetaTrader trading platforms. While the MetaTrader platforms include various signals themselves, MQL5 also gives traders access to signals developed by other members of the community.
All you have to do is to just register your username in the MQL5 community and enter it in the settings of your Forex trading platform. This MT4 service offers many benefits.
First, there is no need to change your broker before you can get the Forex automated trading signals in your MT4. In fact, the signals will be directly on your MT4 account. Also, there is virtually no additional cost. Hence, you will still have spread similar to those in your regular account. However, most other signal providers will burden you with an increase in fees.
Moreover, using this service will avail you the opportunity to interact with other traders. You will also be able to make use of expert advisors.
Of all the social trading and Forex automated trading signal networks, ZuluTrade is arguably the most popular.
It has a large number of signal providers — more than 10,000. It also provides a regular release whereby it ranks signal providers according to their success rates. In addition to its easy access for all internet users, it also provides a free virtual account for practice and trial. ZuluTrade supports a wide range of brokers from different parts of the world.
The benefits of using ZuluTrade include:
- Free demo account.
- A wide range of successful traders to copy.
- Many brokers from many countries.
- Transparent data.
- Low cost.
- Standard mobile apps.
However, it has some drawbacks. Sometimes, you may find more terrible and conflicting signal providers than successful signals. Therefore, it is still necessary for you to maintain sound money management principles notwithstanding the automated signals you have subscribed to.
Finally, you should do adequate monitoring and research when choosing the right combination of signal providers.