Of all financial markets, the Forex market is the largest and most liquid. Its unique features make it easy to participate in, with liquidity drought hardly ever being a concern. Every Forex trader, therefore, can be sure that their orders will be filled and that abundant opportunities to make money will always present themselves.
Hence, every retail trader participating in the Forex market seeks to reap tremendous gains from it. Usually, people are attracted to the Forex market by the numerous campaigns touting it as the ultimate financial market to make a lot of money.
Unfortunately, however, within a short time, reality always dawns on them. Making money in the Forex market is not a walk through the park. It takes as much efforts and dedication to succeed in it as it takes to succeed in any other endeavour.
Reports have it that over 90% of retail Forex traders lose their money to the cold hands of the market. Usually, these losing traders get frustrated and ultimately quit. To be an exception, you must be ready to harness some powerful tools that can improve your odds.
And one of them is signals. Here is everything you need to know about this powerful tool that can make you a profitable trader.
Introducing Forex Signals
First, what are Forex signals? Forex signals are messages that are communicated to their subscribers, informing them about profitable tradable setups in the market. The objective of their providers is to help their subscribers improve their chances of profiting.
Despite being relatively new, Forex signals have grown to become a powerful and effective tool that has made many erstwhile struggling traders into successful ones.
Hence, incorporating the right application of a sound signal service into your toolbox should be one of your goals as a beginner Forex trader.
There should be an emphasis on the right use, though. This is so because Forex signals not properly deployed will not result in the desired results. However, before you learn the correct way to use them, you should have a basic understanding of how they are generated.
Categories of Forex Signals.
There are different categories of Forex signals, depending on how they are spawned. Some signal services, for example, are based on fundamental analyses of the Forex market. This category of trading signals relies heavily on countries’ economic news and data such as inflation, unemployment rate, and balance of trade.
Conversely, there are signal providers who analyse the Forex market using technical tools such as charts, indicators (e.g. Relative Strength Index, Moving Averages, etc.), and candlesticks.
The first category uses strategies, such as trading the news. On the other hand, the second category includes techniques such as price action.
Then, another classification system of Forex signals is based on their source. From these, there are manual and automated ones.
Human analysts are the creators of manual signals. Manual signals do not completely remove the human factor from the equation. Automated signals, on the other hand, entirely remove the need for human research and decision-making. As a result, the subscribers of automated signals can make smart trading moves that are independent of emotions.
While manual signals still retain the human factor, automated signals might be preferred because of their speed and efficiency. Nevertheless, either can deliver outstanding returns if correctly deployed.
Benefits of Using Signals
There are many benefits associated with the use of signal services. As highlighted earlier, their correct use has helped many erstwhile struggling traders to become profitable.
The following are the benefits you too will start enjoying once you subscribe to a quality signal service.
- Increased Trading Speed: The first advantage of Forex signals is that they help to improve trading speed. Also, by eliminating the need to analyse the market before taking trades, more time and efforts are freed up for the traders to do other things.
- Protection Against Losses: Overall, signals aim to make struggling traders profitable. They exist to protect them against losses. And they do this well by helping them to take winning trades.
- Elimination of Emotions: Above the earlier mentioned benefits of signals, there is one that rules supreme. It is the fact that they can help to eliminate emotions in the making of trading decisions. Emotional trading is regarded as the number one reason traders fail. Using a signal service can help to protect against it.
Creating a Trading System Compatible with Forex Signals
Creating a Forex trading system is not a one-day thing. You can lay the foundations in a day, but it takes a long time and patience to develop it fully. Also, it will require tweaking from time to time.
Also, you should seek to make the trading system compatible with your Forex signal service. Here are two considerations to make it so.
- Time FrameArguably, the most vital factor you should have in mind when creating your trading system is your trading style. What kind of trader are you? Are you a position trader? Do you scalp or are you more comfortable swing-trading?How frequently do you enjoy looking at the charts? Which time frame are you most comfortable working with? Daily, weekly, monthly, or yearly?
Your trading style will determine how long you are comfortable holding positions, and subsequently the kind of signal service you should subscribe to.
- Risk Management:What is your risk profile? How well do you tolerate risk? Are you an aggressive risk-taker, or are you defensive? Whichever you are, using a signal service that operates a similar risk-reward ratio policy as your system will make things considerably easier for you.
On a final note, deciding to use a Forex signal service might be the best choice you will ever make for your trading career. However, you should ensure that you use a good one. 1000pip Builder is there for you, and you can sign up for a membership with them here.