Understanding Forex Signals

Forex is a shortened name for the foreign exchange market, but also denotes the trading that takes place in the market. What is traded in Forex is currencies, and the currencies market is the single largest, most liquid market in the world. Forex is a decentralized global market, which operates 24 hours per day, six days per week, beginning at 8:15 p.m. Greenwich Mean Time on Sunday, and continuing until 10:00 p.m. Greenwich Mean Time on Friday. Vast sums of money are committed daily to Forex trading, both by the many institutional investors operating in the market and by individual retail investors. The most traded currencies include the following:

• United States Dollar
• Euro
• Japanese Yen
• Pound Sterling
• Australian Dollar
• Swiss Franc

Individual traders often attempt to use trading systems to streamline and perfect trading. A system is simply a set of trading principals and practices which are incorporated into a package which is used in unified fashion to design and implement trades. Often these systems generate and follow signals which designate that certain specific trades are warranted. Time, instrument, and method of trading are defined by systems, based upon the signals followed.

Many consider Forex signals to be the founding basis of any trading strategy. They are looked upon as indicators of the strength or weakness of any particular trade. Following signals, a trader can develop an instant assessment of market conditions without the necessity of measuring longer term market conditions. Signals are generally delivered to traders from professional services that are devoted to compiling signals and distributing them to active traders. Signals are generated during all market hours, 24 hours per day, and six days per week. Providers also distribute them throughout the day, including even in streaming fashion as they are released. Signals are delivered in various ways, including by Internet and email, by desktop software interface, and by telephone. Traders pay subscription fees for these services, daily, weekly, monthly, or even yearly. Prices range from six dollars per day to $1,000 per year and higher.

Forex signals are relied upon for signaling entry and exit points for specific trades. Signals often indicate what to trade and how, but more importantly when. Signals can be based on varying durations of data, from very short time frames to very long ones. Traders generally have preferences as to which time frame to follow most closely, and experts also recommend one time frame over another. Often experts will recommend long term trading over short term. Market fluctuations in the short term are commonplace, and given that Forex trades are entered on margin, sometimes of only 10% of trade value, the risks of short term trading are significant. Most private investors have only limited capital to trade with, and the risk of trading in a sharply moving environment is substantial.

The most popular way to get Forex signals is through a professional signal provider. Many of these also offer trading tools intended to help interpret and apply signals. Some providers offer free trials of their signal services with free Forex signals provided during the trial. A trader may sign up for more than one service, just to collect the free Forex signals for trial and testing. Comparing one provider to another, a trader can probably find one that is best suited to the trader’s individual style and practices.

Rick Silver is as en avid forex trader who enjoys sharing his knowledge through guest blogging.