Understanding and Using Forex Signals for Profitable Trading

The foreign exchange (forex) market is one of the most liquid markets in the world. With trillions of dollars changing hands on a daily basis, it offers the opportunity to make large profits – if you know how and what to trade, that is.

This is much easier said than done, however, since spotting the right trading opportunities is not exactly a walk in the park. The challenge is in learning how to find these opportunities as it will be the key to efficient and profitable trading positions.

There are different tools available to help you achieve your trading goals, and these are mostly based on forex trading signals. Read on to learn everything about forex signals as well as important information on the most reputable forex brokers to work with.

Forex Trading Signals Explained

Forex trading is all about taking educated and profitable positions on the trading markets. Forex trading signals, or simply forex signals, are recommendations or suggestions upon which forex traders can base their decisions on when to put their money on a specific currency pair.

As a trader, you have to know what to invest in, why, and more importantly, when to take a position. Without being well-informed, you would be forced to trade blindly – without guidance, and in most cases, this leads to bad trading decisions. Forex trading signals are a vital part of every forex trading strategy.

Forex signals can also be considered as indicators of things or events that are currently happening or about to unfold on the forex market; and these offer money-making potentials if you know how to use them to your advantage.

You can find many kinds of signals based on different underlying factors like trends, times, and price movements, among others. To cite an example, a forex signal may be based on news of a national disaster, a significant political event, or any other news story that can influence the forex trading markets.

The most prevalent signals, however, are derived via technical analysis of the forex market, which can either be done on your own or with the help of a signal provider (may be automated or human.) You can find more details about various signal providers later in this post.

TradingToplists' guide explains everything about how forex signals work.
Forex signals can be useful when trading with currencies.

How Forex Signals Work

To better appreciate how a forex signal works, here is an example using the USD/EUR pair.

Assume that the exchange rate for the currency pair has been bearish for a given period of time. This means that the rate is on a downward trend. Now, signs of a price turnaround have become apparent. A bull market is typically an accurate indicator of a good time to make an investment.

This is also true for a market that has been bullish over time, but has begun to show signs that it is about to turn into a bear market where prices are on a downward trend.

Various Types of Forex Trading Signals

Forex signals can be grouped under two categories:

  • Signals you can spot on your own – As a trader, you can study the forex market and formulate an opinion on the direction you think the market will take. Finding signals yourself will require a good grasp of the workings of the market, as well as the different factors that affect currency pair prices. This is why finding signals is often done by skilled, veteran traders.
  • Signals provided by FX signal providers – Forex trading signal service providers may be a group of people, a single person, or a software program like an Expert Advisor (EA) or a forex robot. Signals from forex signal service providers may be free or paid. You can find a list of the different kinds of signal providers later in this post.

Bear in mind that there is no such thing as a 100% accurate trading signal or signal service provider. This simply means that even while using a reputable and experienced signal provider, there is still a risk of landing a bad trade or losing money. At the end of the day, you should still trust your instincts and bear the risks associated with forex trading.

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Different Types of FX Signal Providers

Basically, there are four categories by which traders group forex signal providers:

  • Free Forex Signal Providers – This group of forex signal providers often give free signals via Facebook, Twitter or email subscriptions. To quickly find FX signals, simply go to Twitter, then search using #forexsignals. It’s worth mentioning that a lot of providers on social networking sites are focused on a particular currency pair. This means you may need to use a number of providers to obtain as many free signals as necessary.
  • Paid Forex Signal Providers – As mentioned, paid forex signals may be provided by a company or an individual. Forex signals are derived with the use of tools or technical analysis. When using this type of provider, you must make sure that you are getting forex signals from a skilled, knowledgeable, and reputable provider who is not only in it for the profit.
  • FX Signals Systems – Paid signals coming from a number of providers are known as forex signal systems. These signals are almost the same as signals form providers discussed previously. The main difference is that signals provided by a forex signal system often comes from a group of distinct or individual forex trading experts or a number of companies.
  • FX Signals Provided by a Software Program – The signals are typically a component of a forex trading platform. Among the most popular signal providers is the Trading Signals tool of MetaTrader4. The tool bases it signals on prevailing trends and market conditions, as well as on what other traders do. Trading Signals is likewise equipped with a copy feature. This feature allows you to copy signals used by successful traders.

Keep in mind that there are many paid signal providers, specifically from the second and third types listed above, that are basically scams. These unscrupulous providers make their subscribers pay for information and signals that they only get from free service providers.

Top 5 FX Signals Providers

To help you achieve your trading goals, we are recommending five of the best websites and providers of forex trading signals. These providers offer a mix of paid and free signals obtained from signal systems and individual trading experts alike.

  • Etoro
  • BDSwiss
  • FP Markets
  • XM.com
  • InvestMarkets

Some of these providers can be connected easily to the major online trading platforms like MetaTrader4. However, since these are all paid services, they might not be useful to you if you are not willing to spend and are merely looking to use 100% free services.

Free FX Trading Signals

If you are in search for providers of free forex trading signals, we offer a list of free trading signal software programs. However, you must remember that more often than not, these signals are free for a reason. For one, the quality of the signals may be inferior when compared to their paid counterparts.

Following are examples of free FX signal providers:

  • com – The provider offers limited free forex signals.
  • com – The provider offers some free forex signals of good quality, although the service isn’t comprehensive and complete.

One really useful tip to keep in mind is to use the free versions of paid tools. Most of the time, high quality paid versions come with a free version that you can use for a limited time (typically anywhere between 7 and 10 days) or one that has limited access.

TradingToplists.com helps you finding the best forex trading brokers online.
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Why Use the Services of Forex Trading Brokers

Forex brokers can help facilitate your trading activities. When searching for brokers to work with, it is important to make sure that they are regulated and fully licensed. Some of the best and most reputable brokers around include Etoro, Plus500, and IQ Option.

A lot of brokers in our list also have tools that offer a lot of information about forex signals that help you appreciate and understand forex trading signals better. Aside from forex brokers, we also list other types of brokers that facilitate trading of other assets like stocks, CFD, and cryptocurrencies.

Bear in mind that trading can still be a risky activity – even when you use trading signals. These signals cannot tell exactly what will happen in the future, even if they suggest a specific trend. Thus, you must always exercise caution when trading. Trade only with your extra money, and avoid using money you can’t afford to lose.

Final Word

Forex signals are a vital component of forex trading. These signals are important for your trading success. You can get the signals on your own or from reputable signals providers, depending on your preference.

Because signals are time-sensitive, you need to get them in a timely manner. The market is so volatile, and can quickly change. Thus, even if the signal is only several minutes old, it may easily get outdated and lead to bad results.

Luckily, many brokers today offer features that will help you better understand forex investments. Just be careful when choosing a broker to work with.

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