What Is a Forex Signal?

A foreign exchange signal, which is often referred to as a Forex signal, is a recommendation for a trader to either buy or sell a certain type of foreign currency. Forex signals can be provided by either a type of trading software or by a human recommendation.

Because the value of currency is constantly fluctuating, Forex signals happen in real time, and traders use a variety of notification options to make sure that they don’t miss out on a valuable trade. Some traders choose to have signals sent directly to their email, while others use an RSS feed, websites, and even social media platforms.

How Do Forex Signal Systems Work?

Forex signal image
Image via Flickr by wuestenigel.

Forex traders have two different options for finding signals. With manual Forex signals, a trader will sit at their computer and search for different signals to try and determine whether they should buy or sell a type of currency. While this is obviously time-consuming, human traders can often catch things that computer systems may miss. For example, a human may be able to tell when it’s a good idea to pull out of a trade because the market is behaving unusually.

Automated Forex signals are an increasingly popular option for traders who don’t want to spend all of their time in front of a computer. With an automated system, the trader uses a computer program to search for a specific type of Forex signal, and the program will then decide whether to purchase or sell a type of currency.

Automated systems have several advantages over manual systems. For one, an automated system is able to analyze a lot more data than a human trader, giving it the ability to manage several types of currency at one time. An automated system can also search for signals and execute trades 24/7, making it less likely that a valuable signal will be missed.

How Are Forex Signals Created?

Forex signals are created in one of two different ways. An analyst can research different market factors to develop a signal, including current trades that are taking place, as well as how the price of a currency is trending and how it is has trended in the past.

It is also possible to create a computer algorithm for the purpose of generating signals. Like a human analyst, an algorithm will take into account a variety of market factors and then will use those factors to make a prediction about different currency types. These algorithms can be very accurate, but they are not guaranteed.

Now that you understand a little more about Forex trading signals, you should be able to start searching for signals yourself. Whether you search manually or use an automated program, finding the right Forex signals can help you become a successful forex trader.