If you’re a beginner in the foreign exchange market, you may be feeling a little overwhelmed by all of the information presented to you. You’re not alone. There are many individuals who want to take advantage of the foreign exchange market but simply don’t have the time to devote to studying the market to develop a profitable trading strategy.
This why many traders often choose to take advantage of Forex signals instead. Forex signals give an individual the opportunity to utilize the knowledge of more experienced traders while still maintaining control over their investing.
Make sure to read our Introduction to Forex Signals
Receiving Your Forex Signals
A Forex signal service will track the market throughout the day. The key to a winning strategy is to be consistent. Consequently, the Forex signal service will be sending signals to you constantly, and it will be your responsibility to engage these signals.
Signal providers may send signals in a variety of ways:
- Web platforms: Web platforms have become very popular because they’re compatible with any device: laptops, desktop PCs, computers, tablets, and smartphones. With a web signaling service, an individual will usually sign into the platform, and then the platform will load trades as they come in. The advantage is that it’s highly accessible, but the disadvantage is that trades can easily be missed — you’ll need to be watching the web consistently.
- Desktop platforms: Desktop trading services will run on your computer, showing you key pairs and their indicators. The advantage of a desktop platform is that it is often more comfortable and robust for users, but the disadvantage is that it does require that you be at your PC.
- Mobile platforms: Today, there are many foreign exchange trading apps, which may also come with live Forex signals. There are also other options for those who want to accept Forex trading signals on their phone, such as setting up email account alerts for trading signals and then checking the phone when necessary. Some FX signals can come in the form of text-based alerts (SMS) and other notifications to begin trades.
The MetaTrader 4 platform is probably the best and most recommended platform option for any new trader. It is used by millions across the globe and its sophisticated yet user-friendly layout and functionality will allow for you to trade with all types of forex signals, and across all devices.
You can use a variety of platforms rather than devoting yourself to just one; you may use a desktop platform while at the computer but switch to a mobile alert system when on-the-go. Either way, the main objective is that when your live Forex signals are received, you have fast access to place the trade. The better the Forex signal provider, the more likely they are to have different ways of sending alerts and communications too.
Reading Your Forex Signal
A trading signal will usually consist of a pair, action, stop loss, and take profit. This trading signal may also include a status, which is optional, and which will note timing. The trading pair will be the currency pair that is being traded, such as AUD/USD. The action will be either “BUY” or “SELL.” The stop loss will be set to automatically close the trade if it is losing a certain amount, while the take profit will be set to automatically take profit after a certain amount. These are incredibly important.
A complex day trading strategy might not use stop losses or take profits at all; the trader simply knows when they want to stop their trade, and relies upon their knowledge and experience. But in a Forex signal, the stop loss and take profit are incredibly important. They are used to build a consistency that a new or beginning investor simply will not have. Stop losses and take profits should not be adjusted on-the-fly by new traders; this will interfere with the methodology of the trading strategy.
Some strategies and Forex signaling services may also use a “trailing” stop loss. A trailing stop loss trails behind the most current price point by a certain amount, thereby creating a “slam on the breaks” situation where the trade will only be closed if the amount goes down sharply from where it was. A trailing stop is a rather advanced strategy; it’s used to maximize profits and minimize loss, but in volatile currencies, it can trigger a stop too often.
The take profit rate is the rate at which the transaction will automatically close. A take profit target is incredibly important: too often, new investors will try to “ride” a trade out for too long, hoping to capture as much as they can. This can lead to a situation where a winning trade is milked for too long and becomes a losing trade. The optional “status” in a Forex signal will usually tell you when to enter in the trade, or whether the trade is currently active or pending.
Placing Your Trade using the Signals
There are hundreds of Forex trading platforms available, ranging from web-based applications to iOS apps. When putting in your Forex trade, you need to be incredibly precise. In general, it’s recommended to find the currency pair, make the move to purchase and sell it, and then simply copy the stop loss and take profit boxes into the trading platform itself. Some Forex signals can automate accounts for you, and some platforms have their own signals that you can follow. This type of integration can make the process easier, especially for a new investor.
Most Forex trading platforms will concentrate on major pairs, such as USD/JPY or AUD/USD. But some trading signals may take advantage of more unconventional pairs, such as AUD/CHF. If so, you need to find a platform that supports trades with these currency pairs.
Finally, once you are certain that you have copied the information correct, you can initialize the trade. Due to the way that the Forex market is run, the trade should occur in real-time — immediately after your purchase or sale.
There are times when you may miss a trade but see that it has been signaled later on. All trading signal platforms have different rules for this, but most do advise that you put a trade in as long as it is still active on the system. For the trading strategy to work, as many trades as possible need to be followed.
Watching Your Trade Order
Now you have placed your trade using the advised trading signals, your trade order should then close by itself. In other words, you shouldn’t have to do anything else. The trade will either close when it has lost too much money (hit the stop loss) or when it has profited enough (hit the take profit).
However, there may be times when your live signal service gives you more information or alters the trade. If so, you may need to adjust your stop loss or take profit. This can happen when something radically changes on the market or new trends are discovered. Trades may also be canceled early if they are found to be too risky or if the situation has been altered.
Final Word of Advice
All trading comes with risk, but the use of Forex signals can substantially reduce the risk for beginning investors, while also letting them pick up some Forex trading tips from experienced professionals. That being said, Forex signals aren’t just “training wheels” for real trading — fx signals are used by even professional traders and are often quite advanced.
In a market as fraught with complexity and changes as the foreign exchange market, fx signals offer consistent, calculated returns rather than higher risk strategies. Just make sure to always read the terms and conditions of the signal service provider before subscribing.