EVERYDAY about $4 Trillion worth of currencies are bought and sold all over the world. For 5 days a week, currency traders and brokers try their best to squeeze out whatever profit they can get in every forex trade. Given the staggering amounts of money involved and the rapid changes that occur in the foreign exchange market, market players need to have the latest market news, trends and even buy and sell indicators. To meet this critical need, brokerage houses now are incorporating forex signals into the overall business strategy.
Forex signals are analyses and buy or sell recommendations on specific currency pairs. These messages are usually received by the trader electronically via email, instant messaging or directly on his online trading console. Mobile devices such as smartphones and PDAs can also receive forex signals ensuring that the trader gets the message anytime, anywhere.
The forex signals received by the trader may range from technical analysis, breaking financial and economic news to outright purchase or sell suggestions by the broker or the research team. Many forex trading software also have their own automated forex signals which can be tweaked and customized by a brokerage company to function as an internal information service.
Automated or manual forex signals
Foreign currency traders carry out trades using either the manual or automated types of forex signals systems. The automated system refers to forex software with instructions to look for indicators that will trigger alerts to the trader in case specific trading and market behavior and conditions are met. The forex signals the trader will receive are buy or sell suggestions. Manual forex signals on the other hand means a trader will receive the signals and evaluates those signals before deciding to buy or sell a currency pair.
Traders are still divided on whether forex signals coming from an automated system should be absolutely trusted. Some forex market players think that following an automated system removes valuable experience and intuition out of the trading equation. Those in favor of the automated forex signals meanwhile contend that the system removes any psychological factors that come into play during trading thereby resulting to more data-based and objective trades.
Forex signals “black box”
Many foreign exchange brokerage companies have now developed their own software to create their own internal forex signals and alerts. These types of software have their own preset calculation and command system where any trader can input data and give relevant results including buy or sell suggestions.
The calculations and algorithms that form the heart and brains of the broker’s forex signals system is sometimes called the “black box”. As the store house of a brokerage house’s best trading practices and secrets, “black box” is always kept in a secure location and never revealed to anyone except the company’s most senior executives.
Forex signals are available as free and paid services to traders. There are also internally created trading alerts that investors may join or subscribe to. Many forex signals services provide aggregated information from culled from multiple sources while others rely on just on provider with reliable and established track record.
Depending on the type of service, forex signals services may include among others:
1. Recommended entry and exit point numbers for specific currency pairs
2. Technical analysis supported with charts
3. Past trading highlights
4. SMS and mobile alerts
5. RSS feeds
6. Latest financial news and updates
7. Simulated trade results in the case of automated trading software or robots
Despite the widespread use of forex signals, many experienced and reputable foreign exchange traders advise caution and not to rely too much on robots that actually perform automated trades. Forex trading is both an art and a science and forex signals can immensely help investors make informed trades. There is no perfect forex signals system otherwise this wouldn’t be shared by its proponents and developers.
In sum, time and information are two of the most valuable assets a trader can have in the competitive world of forex trading. Forex signals help market players save time and remove trading uncertainties by delivering crucial market intelligence. However, despite the automation of a number of forex trading systems, due diligence must still be made by users and not rely entirely on forex signals.