Choosing a Reliable Signal Service Provider Is Crucial…
A Forex Signal Service is the first of three methods of hands off trading that the forex trader may consider, the others being Automated Forex Trading Software and Forex Managed Accounts.
Forex signals are sent from a (generally) commercial signal provider; you subscribe and they either:
1) send you suggestions for trades, usually by email or SMS, i.e. a MANUAL process
orForex Signal Service Signal Tower Illustration
2) place trades automatically for you, by means of software that allows access to a trading account in your name, i.e. an AUTOMATIC process
Mostly the signals are based on technical analysis, though some services at least claim to incorporate fundamental analysis of prevailing market conditions into their signals.
Free forex trading signals services are less common and it is generally a case of getting what you pay for: many are unreliable at best and dangerous at worst. I have however included a few links to providers of free forex trading signals below, if that interests you.
Only you can decide what is the best signal service for you. As ever, remember to Do Your Own Research!
Going beyond the simple trades suggestion functionality, some signal vendors provide services of an educational manner. You get access to blogs, coaching services, forums, past signals history that purportedly shows the success of the system, etc.
The signals may include the following:
Where to enter the trade
Where to place a stop loss
Where to place a take profit target
Percentage of account to risk on the trade
Optionally, when and how to trail the stop loss
So, you still manually execute the orders as and when you receive the signals. The only part of the process which is automated for you is the actual selection of trades to take.
In this scenario, you give access to your trading account (or set up a new one) to the signals provider and they trade that account for you using the same signals they transmit to the rest of their membership.
So what are the advantages of using signals in your trading? They include the following:
If you can trust the signals, you may potentially be more successful than taking trades based on your own analysis of the market
If the track record of the signals service can be verified, this may give you more confidence in trading it than in trading on your own. It is therefore somewhat of a “forex for beginners” option, appealing to those who don’t have the time or skills to do the necessary analysis, or who lack the confidence to select their own trades.
Related to the last reason, it may appeal to those seeking the advice of a supposedly expert trader
In the case of email/sms alerts, the process of trading is still not entirely automated, which can be an advantage if you are the type of trader who likes to have a measure of control over the process
The disadvantages involved in using a signal service include the following:
This is a sector of the forex market that is even more than usually favoured by scammers, or just downright incompetents. You have to do due diligence in selecting a forex trading signals service!
With signals that are sent to your phone or via email, by the time you receive and act on them, the optimal time for trade entry has often passed as the market moves on without you
Again, when signals are just sent to your phone or via email, the process of trading is still not entirely automated, which can be a disadvantage if you are searching for a system that entirely frees you from following the market
A common safeguard offered to the prospective buyer is a free trial, although not all forex signals services provide this. If they don’t, there’s no harm in in asking for one. After all, giving you a month of free signals costs them very little and it’s not as if they are endangering intellectual property in the process.
Another safeguard that you can put in place is to ensure the results touted by the vendors can be verified through an agency such as Myfxbook. The best forex signals providers should have no problem doing this. Many vendors just show a flashy Excel or PDF results page that really that proves nothing in this day and age.
Where and when possible I have provided a short review of each of the following forex signals providers, just click on the link:
Live Forex Trading.info
Check back for AuthenticFX Signals, coming soon!
If you’d like to take the automation of your trading one step beyond the idea of the forex trade signals, go to the next section where we cover Automated Forex Trading Software