How exactly do you trade in the foreign exchange market? There is no exclusive answer to this question – as the saying goes, different strokes for different folks. With the many different ways by which you can trade in the forex market, the newbie trader who is just about to dip his toes into the waters needs some guidance in his trading activities. This is exactly what forex signals are for. They make suggestions as to what trades to get into or out of at specific time frames depending on how frequently the forex trader intends to trade. It is, however, still the trader who makes the decision on whether or not to follow the signals.
The use of forex signals is highly recommended as a way to guide forex traders towards profitable trades. These signals tell you when and what to trade at a given time to reap maximum profits. Whether or not you heed these signals and how quickly you act on these signals will impact your account’s profitability. No legitimate forex signal software will point you to a losing trade, but if you do not act on the signals right away, prices and market conditions might change and cause you to miss opportunities for gains. When you have set up your trading strategy and rules, make sure that you stick to it and do not second-guess it even with the presence of positive forex signals.
The obvious advantage of forex signals is that they point forex traders to the right direction. Although it is always advisable for traders to do some technical and fundamental analysis, there is no harm in choosing to take heed of signals in placing trading orders. This is especially true when traders find the signal program that best matches their trading frequency and risk appetite. Trading compatibility is one of the most important considerations in choosing a signal program – what use would a signal be if it comes at a time when the forex trader is out-of-the office or is away from his desk?
Prior testing of forex signal programs is a screening step that forex traders should not skip. Before subscribing to a forex signal program, forex traders should ensure that the program is indeed capable of churning out the information that he needs when he needs them. Even with a software program that has been proven to be reliable, forex traders should still run some tests from time to time to validate the signals given by the program. Since forex signals are based on quantitative data, it might not be as accurate as users expect them to be. These programs provide a more objective view of the market. It is, however, necessary to take into consideration other factors too in determining what direction to take in specific trades.
Qualitative factors have as much effect on currency prices as technical or quantitative factors. Subscribing to news feeds and updates is recommended to keep abreast of economic, social, and political events that affect market or price movements. These qualitative factors are to be taken in tandem with quantitative factors in deciding on what direction to take in your trading activities.