When it comes to the hyper-competitive arena of forex trading, it is quite clear that every trader is looking for their “edge”. Although what actually constitutes an “edge” is debated on a daily basis, it is true that many traders invest large amounts of time in trading signals. Ranked as one of the most important tools every forex trader should have in their trading arsenal, trading signals can help you stay one step ahead in the market.
For those who don’t know, a trading signal, by definition, is the trigger that alerts the trader to open a trade on a set of currency pairs, at a given price or time period. Specifically, it represents an emerging pattern in the market and a trigger to trade, rather than an automatic process (although this is a mode preferred by many). Either a dedicated analyst or a robot usually generates the forex signals europe, which is transmitted to a subscriber in a signal service. Due to the need for completely instantaneous information, the vast majority is sent via email, EA, RSS, SMS, or live.
Now, with the basics of forex trading signals explained, it’s time to learn the general types you need to master to further understand the markup and avoid the most common mistakes.
Buy Signals
As you now know, forex signals are going to be your trigger to make a move in the market. The most common ones are related to buying or selling a particular currency, so let’s take a look at them to get started. Buying signals are intended to indicate that one currency is worth buying over another, which is preparing to rise in value due to an impending event or condition. This type is so common, it tends to come in a variety of sub-forms, such as “Buy” and “Strong Buy”. The emergence of one of these indicates that the time is right to buy the currency in question, so be prepared to make a more or less immediate move.
Sell Signals
In a completely opposite direction to their counterpart, sell signals indicate the opposite and are just as common as the above. When a currency performs poorly and is poised to decline, you will probably observe such a signal. The reason behind them could be fundamental or analytical, but whatever the circumstances, it usually acts as a very strong indicator to get out of a certain currency as soon as possible.
Volume Signals
When large amounts of a certain currency have been pushed in one direction or another, you might observe a volume signal being issued. When one is in place, it pulls you into the market and forces you to keep a close eye on why the move is taking place, as well as addressing its impact on your forex trading portfolio. Unlike a buy or sell signal, a volume signal is not a direct wake-up call to act, but what it is likely to do is indicate a current market trend that you need to make a decision about.