Ultimate Guide to Using Forex Signals
If you are a beginner or a professional Forex trader, signals will always turn out useful for you. Financial trading can be tricky and complicated, that’s why many Forex traders need Forex signals that will help them to make the decisions correctly at the right time. For beginners in trading, forex signals will help in easing into the world of trading as well as reduce the losses associated with trading. If you’re an experienced trader, you need signals to eliminate the need to constantly monitor and analyze the Forex market, thus saving more time to pursue other activities. Irrespective of your forex and CFD trading experience, this ultimate guide will explain how you can maximize Forex signals and also recommend the most reliable signal provider.
What are Forex signals?
Forex signals are trading ideas, opportunities, or recommendations that tell a trader when to open and exit a trade in the Forex market at the right moment. These trading recommendations are centered around a particular currency pair and they should be implemented at a predefined time and price.
Basic components of a Forex signal include:
1. The currency pair to be traded
- The trade recommendation – buy or sell
- The entry price
- The exit price – take profit and stop loss
Using Forex signals can improve your trading performance to a greater extent regardless of your trading experience. In addition, professionals can make use of Forex signals to widen their experience and profitability.
Novices, on the other hand, will totally benefit from Forex signals as they offer several benefits and also allow them to make some profit while still growing in their knowledge of the financial market world. You can also facilitate the trading learning process from forex signals because it helps you gain full insight into the trading options on which the signal is built.
However, trading forex signals is only useful when used at the right time because we are dealing with a volatile market. Hence, forex signals can become useless if you get them too late. In order to ensure that forex trading signals are received at the right time, signals are sent by forex signal companies or providers via multiple channels such as Telegram, Facebook, WhatsApp, Email, SMS, push notifications, to mention a few. Some providers also recommend and offer add-ons that allow traders to receive these signals directly on their trading platform.
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Forex Signals and Copy trading
It’s not common for signals providers to recommend the lot, position size, or percentage of your portfolio to assign for a particular trade – this can only be done with copy trading. While Forex signals and copy trading have the same trading goal, there are numerous differences between the two. Copy trading is a type of trading that involves copying the portfolio and trading strategies of other traders, most especially the more experienced ones. For instance, if a trader opens a trade of 1 lot of GBP/USD, in copy trading, you also do the same. However, with signals, you can decide or choose the percentage of your capital you wish to trade with. Copy trading is regarded as a cheaper version of asset management.
There are several ways copy trading can be executed based on the platform you use. Irrespective of the platform, the pattern is similar. It entails investing a part of your trading portfolio in a specific trader and mimicking all of their trades in a percentage-based way.
It is important to note that most trading platforms don’t approve investing over 20% of your trading portfolio in a single trader so as to encourage diversification of your portfolio. This policy is efficient and wise as it helps to prevent investors from going through a rough streak. It’s important not to have the majority of your portfolio invested in one trader.
In copy trading, you will be monitoring actual people instead of the market moves – graphs, charts, and statistics. This is one of the reasons you need to assess a trader’s portfolio before copying them. Check their track record and learn their trading strategies including the risk management strategies they utilize.
Both forex signals and copy trading are great for novice traders. They are easy ways into the financial trading world and they can allow you to generate some profits. While it is also important to note that no type of trading strategy guarantees success, both forex signals and copy trading are great ways to gain trading experience. They are one of the best ways to learn about financial trading since you’re learning and getting information from more advanced and successful traders.
Types of Forex Signals
Although in trading, there is no universal signal service, a lot of signal setups have common features. Here are the four most common categories of Forex signal services.
- Manual vs Automated Forex Signals: These are categorized depending on how the signals are generated. Manual Forex signals are usually created by analysts or experienced traders. Here, the trader makes the final decision with the use of human intelligence. Automated trading signals on the other hand are created by software or computer that monitors and analyzes price action generated from coded algorithms. An example of automated signal providers include Expert Advisors which employs technical analysis techniques that are based on indicators such as Moving Averages, Stochastics, and Fibonacci Levels
The advantage of automatic signal trading over manual signal trading is that it excludes emotion and the trading execution is much faster. However, because you are so reliant on a computer system, traders tend to neglect the decision-making process.
- Free vs Paid Forex Signals: This category of forex signal groups is based on the price of a signal service setup operator. Free Forex signal providers offer traders signal services without requesting payment while paid signal providers require money for their signal service. The paid category often requests daily, weekly, monthly, or one-time payment subscriptions.
- Entry vs Exit Forex Signals: These are trade ideas that tell you when to enter and leave a forex market. There are signal service providers that provide only entry signals that tell when a trader should enter the market, and some provide only exit signals that tell traders when to close their open position while some offer both. Short-term trading signals mostly require both signals while for long-term trading, a trader will take into account either of the two
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Who Provides Forex Signals
Forex signals are generated by human traders or trading robots who utilize the combination of fundamental and technical analyses to determine the optimal entry and exit level. Humans or Manual providers provide trading ideas derived from their trading experience, technical analysis, and fundamental expertise while robots or automated signal providers use computer software that is created to generate trading instructions once specific set market conditions or parameters occur. Some automated signal providers also send instructions based on market sentiment as well as fundamental analysis by monitoring economic news.
There are several manual Forex signal providers such as FXC signals, Learn2trade, and Wall Street Forex Signals, to mention a few. Only a few of these providers stand out because of their reasonable pricing, proven track record, and quality customer support. One of the most popular auto-trading setups in the world of forex trading is MQL5. Anyone can become a signal provider in the MQL5 community, however, there are several conditions to fulfill before you can subscribe to a signal provider that will meet your requirements. MQL5 helps in assessing the confirmed trading results of all signal providers and rates them. It is also used in copy trading which allows you to copy trades of the trader you’ve selected.
How to Choose the Best Forex Signals?
Whether you are a beginner seeking professional assistance or a professional forex trader who doesn’t have time to analyze the financial market, choosing the reliable and most efficient Forex signal provider is principal. There are hundreds of thousands of forex signal providers and it’s often difficult to identify the good one that will provide you steady income. Here are the major factors you should consider when selecting a signal provider.
- Proven Track Record: This is the most important factor to take into consideration when choosing a signal provider. You should be able to do your research and verify that they are profitable before using them. You can go through their history and back-test their signals to verify that the returns accomplished are as advertised. Typically in trading, a success rate of above 75% is ideal as it will ensure regular account growth with minimal drawdowns. Note that a 100% success rate is not feasible and anyone who promises that is a scam.
- Assess the trading strategy and risk: forex can be traded in several ways such as scalping, day trading, swing trading, and position trading. Before you select a signal provider, you must evaluate their risk management if it matches your preferred level of risk. This is to ensure that you are capable of executing the trade. For instance, your account can only withstand short-term market fluctuations and the signal provider sends only swing trade and position trade signals that last for longer-term, your account might blow up.
- The Time Zone: while the Forex market operates 24 hours a day, you may not be awake round the clock awaiting your provider’s signals. You also have to consider the hours the signal provider operates that is convenient for you. An alternative tip is to consider automating the signals using a signal copier.
How to use Forex Signals?
After you have selected a good and reliable broker, the next thing to do is to select a trustworthy signal provider. This is one of the most vital steps in executing forex trades because choosing a bad signal provider will lead to massive losses. You are putting a lot of faith in the signal provider, so ensure you choose wisely. Before you settle on one, learn about their trading performance, trading strategies, and risk management. There are providers that offer free trials which you can subscribe to test their performance before paying for their premium services.
For automated strategies, you can conduct backtesting to see the performance of the computer in various market circumstances. Furthermore, signal providers can also be tested on a demo account before risking real capital.
It is also important to note that trading with currency pairs can either be short-term or long-term. Short-term signals are useful days for scalping and day trading, while long-term signals last for swing trading and position trading that last for several days – these signals are time-dependent. Hence, ensure you make use of a signal immediately after you get them.
Here are four basic steps that you should keep in mind in executing them:
- Select a currency pair or instrument recommended
- Set the entry point
- Set a stop-loss order
- Set the take profit targets
A forex signal setup can be recommended to open a position based on certain conditions. Thus, there are two types of orders that can be executed in the trading
- Instant execution orders: These are market orders for trades that are executed instantly at the current prices.
- Pending orders: these are market orders placed in advance and are set at a specific price for buying or selling. They are grouped into the limit and stop orders.
- A buy limit order is placed when an asset is expected to lower in price and a buy order is automatically executed if the expected price fall materializes; hence a trader will not have to pay too much. On the other hand, a trader places a sell limit order when they expect an asset to increase in price before falling and a sell order is automatically executed if the expected rise in price materializes; hence the trader will be selling at a higher price. A limit order is often used by day traders to manage risks by buying at a lower price and selling at a higher price.
- A buy stop order is placed to buy or go long on an asset if the price goes up and reaches a specified price higher than the current market price. A sell stop order is placed to sell or go short on an asset if the price goes down and reaches a specified price lower than the current market price.
Signals for Instant execution (“Buy” or “Sell”) instruct you to execute a Buy or Sell trade as soon as the signal was received
Signals for “Buy Limit” and “Buy Stop” orders instruct you to execute a long trade when the price of an instrument reaches a specified level that is respectively lower and higher than the current market price.
Signals for “Sell Limit” and “Sell Stop” orders instruct you to short an instrument or asset when the price reaches a specified level that is respectively higher and lower than the current market price.
FXC Signal Group
FXCentrum is one of the best Forex signal providers in Nigeria. The trading brokerage platform, which has been operational since 2020, offers both access to CFD instruments through their FXC trader app and the popular MT5 platform as well as forex signals through their Telegram channels. They offer Forex, commodities CFDs, metals, stocks, indices, and crypto CFD trading. They also have a mentorship program and organize free training and weekly educational webinars for those who intend on learning about trading, and technical and fundamental analysis.
Their signal platform is educative and informative as their team provides financial news and educational content daily. Their trading experts are one of the most reliable at generating constant returns for clients and subscribers. Here’s what to expect when you subscribe to their platform.
Features of FXC Signal Provider
- Offer free signal services for all subscribers and premium service for FXC broker customers
- 24/7 diligent customer support
- 3- 4 signals daily
- Free Forex educational videos
- Weekly educational webinars
- Over 85% signal accuracy rate
- 100 – 150 pips weekly
- Chat room where you can chat with the mentors
Pros of Using Forex Signal
- It can be very profitable: an important advantage of subscribing to a signal provider is that you can be very profitable. Depending on your account size, trading forex using signal setups can be a good way of adding an extra $100, $500, or $1000 to your monthly salary. However, you can only be profitable if you choose the best providers. Hence, it is very important you select carefully.
- Saves time: whether you are a beginner or professional, you don’t need to spend hours conducting proper research or monitoring market trends and charts yourself when you use signal services. As long as you have peace of mind knowing that experts handle their trades and you can generate profit while trading with the signal service, then it’s more than worth it.
- Pricing: most forex signal providers offer their services at a fee with a reasonable pricing package and high returns. Before choosing a signal provider, traders are advised to also consider its pricing and respective cost-return analysis.
- Great learning opportunity: Subscribing to a forex signal service gives you the chance to learn from experts who are better at identifying profitable trades than you are. By having access to their technical analysis, posts, and signals, you can simply learn from them and find out the reasons behind the signals. Gradually, you’ll become more versed at spotting trades too, and with time, you may not need a signal provider anymore.
Risk of Trading with Forex Signals
While there are several potential advantages of trading with forex signals, there are also certain risks involved
- Lack of confidence: Traders often find it difficult to actually understand why a signal provider and algorithms recommend certain trade ideas. Many of these algorithms are black-box algorithms that even the writers of codes do not properly understand. This will not only affect your decision-making process, but it is also a risky way to trade and there is confidence for guaranteed success.
2. Makes you lazy: Using signals makes you a lazy trader because you will easily become reliant on signal services and neglect the charts
- There are scam signal providers: many signal service providers are not regulated and there are many scams that look like legitimate services. Therefore, it is of extreme importance that you do your thorough research before settling for a signal provider.
Trading CFD and forex with signals have become more and more popular in the world of financial trading. There are several benefits that come with using trading signals such as consistent trading advantage, constant profitability, saving of time, and the opportunity to learn directly from professional and experienced traders. If you’re able to find a reliable signal provider, then the sky really is your limit. You’ll be able to earn an additional $100 -$1,000 monthly by correctly choosing a great signal provider.