Understanding Forex Trade Signals: A Beginner's Guide

Using FOREX trade signals has become a very popular method for trading on the foreign currency exchange. Many people dabble in FOREX, but they have no idea what they are doing. Using FOREX trading signals can simplify things for you and help you greatly in your trades. Here are the basics of a FOREX trading signal service and how they work.

Leveraging Expertise

The main idea behind a signal service is to leverage the expertise of someone else. You may not know much about the FOREX market or how to analyze it but, there are people out there that have spent many years trading the FOREX market. With a signal service, they will do all of the analyzing for you and then allow you to reap the benefits. They will tell you what to trade and when to trade it. If you choose a good signal provider, it could allow you to make a substantial amount of money. 

How They Work

When you subscribe to a FOREX trading signal service, your trading will be greatly simplified. The expert or team of experts that send out the signals will analyze the charts for you and identify profitable scenarios. When a profitable trade is looming, they will send out the signal for you to trade. This could come to you in a number of different ways depending on the service. 

You could receive an email, text message or even an instant message. In the message, it will outline the parameters of the trade that you should take. It might say "Buy EUR/CHF at 9:00 a.m. with a t/p of 30 and stoploss of 45". This means that exactly at 9:00, you are supposed to buy the EUR/CHF currency pair with whatever lot size you choose. You are then supposed to set the take profit for 30 pips from wherever you get into the market at. You are also to set the stoploss value to 45 pips from the point that you get into the market. 

Another type of trade that many signal services use is a pending order. With a pending trade, you can actually tell the trade at what price you want it to open. Therefore, it might say something like "EUR/CHF Buy Stop at 1.4972 and t/p of 50 with stoploss of 25 pips." This means that you are actually going to choose a pending order when you place the order instead of instant execution. Then, whenever the market price for that currency gets to that level, the trade will open with the take profit and stoploss in place. 

Making Profit

Making profit with a signal service is all about the quality of the signal provider. Anyone could conceivably sell a trading signal service. However, you need to choose a good signal provider to go with if you plan on making any money. The FOREX market is very volatile and moves very quickly. Therefore, you need to choose a provider that knows the markets inside and out. Even then, no trading method is foolproof.