Forex signals and Forex patterns are oftentimes interchangeably used by beginners. However, some experts argue convincingly against the practice. This is because one does not necessarily refer to another. This article will discuss the difference in both concepts as well as provide the pros and cons of the same.
Forex Signals Defined
Signals can be likened to guideposts or points where price and time converge. These points can be viewed in isolation or as a whole and are significant indicators for entry and/or exit. Stated simply, signals tell the trader to move or stay put.
Forex Patterns Defined
Patterns are not merely points or several points to be taken in isolation or as a whole, but are specifically moving points that have exact methods of attack. Stated simply, patterns require not only action but also a certain kind of action, previously calculated to provide an identifiable or identified result.
Advantages and Disadvantages of Forex Signals
Signals provide a starting line that diverges into infinite possibilities or plays. Profits and losses depend heavily on the action and inaction of a trader. This in turn depends upon stock knowledge, extensive training, and relevant experience. Without which the trader is at a loss for the next move. The former is indicative of the main advantage of signals, in that there is no specific play that limits the trader. He can move depending on how he wants and based on the direction the market is moving. The latter showcases the weakness of Forex signals, in that beginners or mediocre traders have no strategic pattern or “roadmap” to follow.
Advantages and Disadvantages of Forex Patterns
Patterns direct the trader to act specifically at each step of the way. Assuming the pattern progresses to completion, a trader who follows the set of actions required by the pattern will generate profits. And in most cases, a predetermined stop loss order will minimize losses. However, if the pattern fails to fully materialize then the trader who relied on the same is left with no choice but to declare a stop loss or formulate a new plan of attack at the spur of the moment. Stated simply the main advantage of relying on patterns is that less experienced traders are given specific directions, provided the pattern fully materializes. However, less experienced traders who rely on pattern trading are susceptible to pattern failures or fake patterns wherein losses may already be a reality even with an effective stop loss order.
A professional trader requires raw data as well as important points when they happen, as they happen. This means real time information and analysis. That is why traders invest heavily on the best computers and fastest connectivity. Nowadays traders get information via SMS, RSS feeds, emails, voice calls, website access, tweets, social networking, blog sites, forums, etc.
The Bottom line
The simple truth is that signals and patterns are best left to expert traders who have proper education, extensive training, relevant experience, and access to accurate and up to date information. Forex trading as a hobby is well and good but proper considerations should be made for advancement in education, training, experience, and availability of data in order to maximize one’s learning curve and minimize losses incurred in the process.