A forex signal provider gives suggestions on entering a trade in the market at a specific time, providing entry and exit points of potential trades. These signals are only valid for a given period of time, and signal providers need to make sure that you receive and act upon the signal on time. That’s why these signals are sent out to their subscribers on a regular basis and in real-time, usually via E-mail, SMS, Twitter or other messaging platforms.
Forex signal providers can be classified by their underlying analysis:
News Trading Signals – These types of signals are based on fundamentals analysis, usually news, with the objective to catch the increased price volatility after a news release. These types of signal providers will usually send their forecast just before a major news is released.
Technical Signals – these signals are based on technical setups and are by far the most common type of forex signals. They are either based on a technical algorithm which automatically sends out signals, or are hand-picked technical setups based on chart and candlestick patterns, channels or any other type of technical analysis. These tools form the basis of sentiment analysis, and they can also be used along with technical and fundamental analysis.
3 Types of Forex Signal Providers
There are many types of Forex signal providers on the market. While most of them are commercial services that you have to pay for, there are also a number of free signal providers on the market. However, while free signals don’t cost anything, they usually aim to sell you an additional trading product, such as upgraded subscription packages for a monthly fee.
Generally, Forex signal providers can be grouped into the following categories, based on their services:
Free signals – A signal provider may decide to share their trade ideas free of charge, however, that usually means that for any advanced analysis or additional services you will need to pay. Some forex brokers can also provide free signals if you open a trading account with them in return.
Paid signals – The majority of Forex signal providers are commercial services. They work on a subscription basis, with monthly rates starting at around $100. There are also providers that charge much more than that. The main question you need to ask yourself regarding paid signals is if they will pay off in the long-term.
Forex robots and Expert Advisors – The third group of signal providers are automated systems that integrate directly into your trading platform. These programs are usually based on algorithms and technical trading, and provide signals when certain technical conditions are met, such as moving average crossovers.
What Features Should You Look For
Different signal providers also offer a different range of customer support and features. Common for all signal providers is that their trade setups provide entry and exit points for trades on one or more currency pairs. They will usually state how long the signal is valid, on which time-frame the signal is based, as well as provide other useful information such as the reward-to-risk ratio or the probability of the trade setup in percentage terms.
Some of them back this up with supporting charts and commentary for the provided signals, and present the trading performance of their signals with the monthly profit or loss and account drawdown on their website. It’s important to have this information, in order to make the right decision on which signal provider to choose.
In addition, a number of signal providers offer educational material and personal coaching to their subscribers, as well as a free or discounted trial period. If you decide to go for a signal provider, it’s advised to apply for the trial period in order to check the quality and profitability of its signals.
Trading Signal Confirmation
After you subscribe to a signal provider and receive your first signal, it could be hard to resist the temptation to trade on it right away. But wait, the fact that you’ve paid for a signal subscription doesn’t make all the signals profitable. No signal provider is profitable all the time. Instead, look out for your own signals to confirm the trade setup. These confirmations can be anything from your set of technical indicators, candlestick and chart patterns, price-action, or a combination of those that need to validate the signal that you just received.
Signal Provider Scams
As with any business which matures with time, forex has also become a victim of various scam schemes. One of them is signal providers whose main objective are to rip off their customers. Those are usually paid services, which promise and “guarantee” an unbelievably profitable trading strategy, usually developed by “professional forex traders who have worked in large investment banks.” Once you subscribe to their service, you find out that their signals are mediocre at least, or they don’t send trading signals at all. To avoid becoming a victim of such a scam, always do your research and find reviews of other customers about positive and negative sides of a particular forex signal provider.
Forex signal providers are considered a “shortcut” to forex trading. They will provide timely entry and exit signals for potential trades, usually at a fixed monthly subscription starting from around $100 and more. Beside paid and free signal providers, they can also be grouped by the type of analysis on which their signals are based, such as news trading (fundamental) signals and technical signals. Other signal providers will try to sell you an EA (Expert Advisor), that integrates into your trading platform and handles the trading for you.
You need to do your research and check online reviews in order to find an honest signal provider that provides meaningful signals based on thorough analysis. In the end, you might as well invest that time into learning to trade by yourself, as the best way to become a profitable trader is to trade and learn from your own mistakes.