Forex trading signals are defined as an analysis or hypothesis that a trader uses to whether he should buy or sell a particular currency pair at any given time. These Forex trading signals can either be derived from studying technical analysis or fundamental analysis or conclusions drawn after studying the currency pair based on both methods of analysis.
As such, Forex trading signals comprises of a bunch of signals that work in synchronization with each other to produce the actual buy or sell signal. The actual process of determining these Forex trading signals can be developed by the trader themselves or provided for free by their brokerage firms or a paid professional service which the traders subscribe to for the Forex trading signals.
Read More: Forex Trading
Forex trading signals form an integral part of any Forex trading strategies and are not just used for the determination of the proper entry and exit point of a market position. Forex trading signals are also used as the foundation for any automated Forex trading system. Once the parameters for obtaining the forex trading signals have been defined by the trader, he can use these parameters to “teach” computer software to execute a “buy” or “sell” order when the requirements of these parameters are met for a particular currency pair.
Automated Forex trading or algorithmic trading uses Forex trading signals in conjunction with computer software. With the use of the automated Forex trading system, a trader will be able to take out the psychological impediment out of the equation of Forex trading. No longer will a trading decision be subjected to the whims of human emotions.
In this manner, a trader will no longer be concerned with greed or fear of losses affecting his investment decisions. In short, the viability of any investment decision is solely determined by the Forex trading signals derived from the analysis of technical charts or fundamental analysis of the economy. Nevertheless, having stressed the importance of Forex trading signals in one’s trading strategy, it is important to also note that there is no such thing as “The Holy Grail” of Forex trading signals.
If there were such a thing as a “holy grail” of Forex trading signals, then we would only find winners in the Forex market and no losers at all. The fact is, according to a survey done among brokerage firms, 95% of retail investors make a loss with their trading. Even if there were such an efficient system that consistently generates winning forex trading signals, we would find the owner of such a system unwilling to share the system. Not surprisingly, we always find the large financial institutions constantly wanting to upgrade their software system as well as being extremely secretive about the software system that they are using.
Although there are limitations with Forex trading signals, it is still important for you as a retail investor to try and seek out the best of what technology has to offer in order to make your trading more efficient and profitable.
Leverage on the Forex Market
Leverage allows Forex traders to control more currency in a trade than they have deposited in their trading account. This is where the real power of Forex trading lies. Therefore, trading with the leverage system wisely can work in your favor, and bring you big profits.
With 1:100 leverage, the trader needs 1 unit of currency to control 100 units in the Forex market. Thus, it would only take 100 units to control 1 mini lot (10K) in the fx market or 1000 units to control 1 standard lot (100K).
Forex Trading Hours
The fx market is based on “spot transactions”. The reason for this is that trading takes place 24 hours a day, 5 days a week. Trading never ceases in the Forex market, apart for weekends and holidays. This includes Christmas and New Year’s Eve when the Forex market closes early.