FOREX Signals
One of the disadvantages of FOREX
trading is the time investment needed to monitor the markets for advantageous
entry and exit points. It's possible to sit in front of a computer monitor for
hours watching the markets. Of course, you can use automated orders such as
limits and stops. These allow you to walk away from your computer with the
knowledge that your losses will be kept to a minimum, but by doing so, you may
miss out on potential profits because your limit order kicks in too soon.
If you don't have the time to watch
your computer monitor and still wish to achieve as much profit as possible,
consider signing up for a FOREX signal service. These services monitor and
analyze the market for you and send their findings directly to your computer
desktop, email, or SMS on your cell phone or pager.
Companies that offer FOREX signals do
so on a paid basis, so you have to sign up and pay a monthly or yearly fee. Some
brokers may offer this service as an extra which integrates into their trading
software. You can receive signals as a popup on your screen or by any of the
other methods described above.
There are usually a limited number of
currency pairs that are available for FOREX signals. Most services offer signals
on EUR/USD, USD/JPY, GBP/USD, USD/CHF, but specialized services may offer other
currency pairs.
FOREX signals are primarily based on
technical analysis of market conditions. Most companies use a combination of
indicators to identify main trends and entry and exit points. The results are
sent to subscribers who have the option of acting on them or passing. Some
services will even execute the trade for you.
Using a variety of technical studies,
various types of signals can be derived from currency charts. The SMA (Simple
Moving Average) indicates buy signals when currency prices rise above the
average line. Sell signals occur when the price falls below the moving average
line. MACD (Moving Average Convergence Divergence) studies have a signal line
that is used to generate a buy signal (above the line) or a sell signal (below
the line).
Volume indicators are used to
determine market interest. High volume (especially near the bottom of the
market) can indicate the start of a new trend while low volume indicates
investor uncertainty. Bollinger Bands indicate potential changes in the market.
Sharp price changes tend to occur when the bands tighten while prices that touch
one band tend to go all the way to the other band. Other indicators like
volatility and momentum can be used to reinforce signals provided by other
sources. Taken together they form a relatively reliable source of information
about how the market is behaving.
Are signals a sure thing? Of course
not, otherwise we would all be millionaires. Signals can give you good advice
about which currencies to trade, but no signal service will guarantee their
information is 100% accurate. Reputable services will show you their track
record, however, and let you see for yourself how they have done in the past.
FOREX signals cost anywhere from $50 to $200 a month. It's up to the individual
trader to decide if the cost is worth it. Don't think that signals can take the
place of trader education – they are advice, and if you don't have the knowledge
to analyze the advice, you should go back to the books before using a signal
service.
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