Investment & Financial Articles
Title: Forex Signals - What They Are and How To Use Them
Author: Staff Writer
One of the disadvantages of FOREX trading is the time needed to
be invested in monitoring the markets for advantageous entry and exit points.
It's possible to sit in front of a computer monitor for hours watching the
markets move up and down.
Of course, you can use automated orders such as limits and stops. These allow
you to walk away from your computer with the knowledge that your losses will
be kept to a minimum, but by doing so, you may miss out on potential profits
because your limit order kicks in too soon.
If you don't have the time to watch your computer monitor and still wish to
achieve as much profit as possible, consider signing up for a FOREX signal
service. These services monitor and analyze the market for you and send their
findings directly to your computer desktop, email, or SMS on your cell phone
or pager.
Companies that offer FOREX signals typically do so on a paid basis, so you
have to sign up and pay a monthly or yearly fee. Some brokers may offer this
service
as
an extra which integrates into their trading software. You might receive
signals as a popup on your screen or by any of the other methods described
above.
There are usually a limited number of currency pairs that are available for
FOREX signals. Most services offer signals on EUR/USD, USD/JPY, GBP/USD, USD/CHF,
but specialized services may offer other currency pairs.
FOREX signals are primarily based on technical analysis of market conditions.
Most companies use a combination of indicators to identify main trends and
entry and exit points. The results are sent to subscribers who have the option
of acting on them or passing. Some services will even execute the trade for
you.
Using a variety of technical analysis methods, various types of signals
can be derived from currency charts. The SMA (Simple Moving Average) indicates
buy
signals
when currency prices rise above the average line. Sell signals occur when the
price falls below the moving average line.
MACD (Moving Average Convergence Divergence) studies have a signal line that
is used to generate a buy signal (above the line) or a sell signal (below the
line).
Volume indicators are used to determine market interest. High volume (especially
near the bottom of the market) can indicate the start of a new trend while
low volume indicates investor uncertainty.
Bollinger Bands indicate potential changes in the market. Sharp price changes
tend to occur when the bands tighten while prices that touch one band tend
to go all the way to the other band.
Other indicators like volatility and momentum can be used to reinforce signals
provided by other sources. Taken together they form a relatively reliable source
of information about how the market is behaving.
Are signals a sure thing? Of course not, otherwise we would all be millionaires.
Signals can give you good advice about which currencies to trade, but no signal
service will guarantee their information is 100% accurate. Reputable services
will show you their track record, however, and let you see for yourself how
they have done in the past.
FOREX signals typically cost anywhere from $50 to $200 a month. It's up to
the individual trader to decide if the cost is worth it. But never imagine
that signals can take the place of trader education – they are advice,
and if you don't have the knowledge to analyze the advice, you should go back
to the books before
using a signal service.
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