Beginner and experienced traders and investors are all after one thing in the world of capitalism: profit. Leveraging on technology and trading experience, most of these forex traders and investors have learned how to predict the market trend; thus, the optimal times to buy and sell. But for beginner traders, this might overwhelming if they do not have an expert guiding them.
To level the playing field in the forex market for traders and investors irrespective of their trading experience, forex signals are used. Forex signals, just like the name suggest, indicate when you should enter a trade (buying or selling a currency pair) and when you should take profit or cut losses.
This system works by accumulating repetitive market trends observed over the years and also vital information from the news which is likely to affect the financial market. Enough of the jargon, let us discuss how you can make profits with the use of forex signals.
Decide on the Best Currencies to Trade
Operation of the financial market can be summarized as exchange of something for another. Or better, buying a currency at a lower price (bear) and selling for a higher price (bull). Before you decide on using a forex signal, identify the currency pair you will like to invest in. Based on survey statistics, four currencies pair ― EUR/USD, USD/JPY, GBP/USD, and USD/CHF ― accounts for about 85 percent of the world forex trading. We recommend choosing 1-3 currency pairs that you wish to master.
Choose the Best Forex Signals Provider for You
To be frank, there is really no “best” forex signals provider. Every trader is different in terms of trading style, risk appetite, and trading goals. Nevertheless, there are lots of them you may need to avoid. Unfortunately, there are many scammers forex signals industry. Distinguishing the scammers from the good forex signal providers might not be easy, that is why we always advise to double check before making a decision based on the forex signal received. If you are a beginner trader with small capital to trade, there are some free forex signals you can use. However, premium (paid) forex signals are more reliable and come with more benefits and professionalism.
Confirm How the Forex Signals Are Generated
Another important point to consider is how the forex signals are generated. Don’t hesitate to ask the forex signal provider. Generally, forex signals are generated in two ways:
Automated Forex Signals
These signals are deduced by software programmed by an expert or team of expert traders using their gathered knowledge of the financial market over the years. With the aid of a new technology called Machine Language (ML), the software can on their own continue to evolve in their understanding of the market. They can use prior information provided coupled with the latest market behavior to make a better judgment of the market. They are fast and can provide multiple signals at a time which allows you to take advantage of opportunities as they present themselves. However, they are limited since the information provided to the program may be wrong. Aside from that, the program could malfunction.
Manual Forex Signals
Unlike the automated, the manual forex signals are directly generated by experienced traders constantly analyzing the market. Most of these signals are what you will find on social media platforms like Twitter. It is a great choice for long term investment as they offer larger profit targets compared to the automated signals. But they are slow to compile and the opportunity might have passed by the time you finally receive the signal.
To choose the best for your trade, consider how often you are willing to trade and how long you want to cash out. For quick or short term investment, the automated may be great while the manual is good for the long term. In the end, it all boils down to your preference.
Test with A Demo Trading Account
When you decide to finally use a signal, test how effective it is with a demo account before using it in your real account. With this strategy, risks can be mitigated and you can worry less about losing your money. If you can get two different demo account may be from two different brokers, try the forex signal you are considering in one and use your knowledge of the financial market in the other. At the end of the day, you should be able to see which is better and sometimes both methods might not work. Therefore, you either get another forex signal provider or upgrade your knowledge of the market ― better do both.
When you receive forex signals, you might be tempted to risk big to gain big: Don’t do it. Stop and think. The forex market is like any other financial market. It runs on the principle of profit and loss, so be very cautious of how much of your income you invest. Experts advise to invest no more than 2-3 percent of your initial capital for any single trade. It is possible to miss out on a big opportunity but this will save you from a big losses too.
Closely Monitor Your Trades
What you earn out of a forex signal is mostly dependent on how much you are glued to managing your assets. Forex signals usually come with a profit target i.e. the maximum the profit it is expected to reach. If you observe the profit is likely to go beyond the set target, increase your target with some pips, say 10 or 20.
Likewise, when you observe the loss predicted by the forex signals is liable to get worse than the received, increase your stop loss so that you can sell it off before being hit by a loss tornado.
Moreover, a wise investment is a result of correct analysis and intuition.
Choose Weaker/Stronger Correlated Currency
After receiving a forex signal, make sure to compare with correlated pair to discover if there is a better deal the signal is not mentioning. Take, for example, AUD/USD and USD/CAD usually correlate. In some instances, one may be stronger than the other. This is why it is important to check the other especially when you get a signal for one. This simple trick can mean a lot in your profit margin. It is also important to note that the difference between opportunity may come in a few hours after receiving the signal for one. Always check consecutively after the receipt of forex signal for one of the correlating pair to be able to take advantage of the other pair.
Do Some Research of Your Own
This might not be easy for newbies, but it is the best way to develop your investment IQ. When you receive forex signals, use it as a guideline to analyze the market yourself. However, this does not mean forex signals are ineffective. It will help to ascertain if the signal is genuine before committing your cash, especially if you are using the provider’s service for the first time.
Always remember that forex signals are just a guide. Better refer them as a means to an end and not the end itself.
To be sincere, the financial market is not a quick to get rich lane. It requires dedication, persistence, and consistency. You are bound to lose and also gain. When you ask most successful traders except if they are not ready to be sincere with you, they have all been burnt by the market fire. Likewise, have they been rewarded for their astuteness. Best deals are not usually the ones that look great on the chart today, they usually come when investors least expected. For the patient traders who have been diligently waiting for their arrival, they come at the right time. This is why hasty traders wonder at the secret of the patient traders’ success.