Forex Trading Signals – Forex Losses or Forex Profit?

I have tried and tested countless systems of forex signals in my day and have had some great, some good and some downright awful results with them.  If you regularly read this blog you will know that I would always advocate for you to know the market that you are trading in and learn how to do it for yourself, this means making your own decisions about where and when to place your trades.  By relying on a forex signal provider you are simply removing these decisions from yourself and placing them with an unknown human, possibly on the other side of the planet and no way to find out what knowledge of the forex market that this person has or what information they are basing their trading signals on.

However I understand that not everyone has the time, patience, competence and willingness to do what needs to be done to master this tricky, risky market and that the forex profits to be had are of too large a quantity for those who do well to ignore.  If you do choose to lean on forex signals to provide you with your trades, be sure to do your research before you sign up to any signal provider.  I scream this at you over and over again in my posts, to make sure you do your research!!  Most forex traders have not got an infinite pot to trade with so be sure to protect yours as best you can and don’t whittle your money away on signal providers with nothing to show for it in the end.

Trading signals are either buy or sell commands which are sent to you from an outside source.  You will follow the signal providers based on their entry and exit levels, trailing stops and stop losses.  Most signal providers will work with the big six (USD/EUR, EUR/GBP, USD/JPY, AUD/USD, USD/CHF, USD/GPB) and will send you signals to trade within those pairs.  You do not have to accept the trades and nor do you have to stick rigidly with their stop losses or take profits.  However I would advise that if you do not know what you are doing, take the advice with a pinch of salt, do not trade what you cannot afford to lose, pick one or two pairs within the information sent to you and trade those two consistently – get to know the pairs.  If you think a trade is riskier than you are happy with, do not place the trade, there is no one holding a gun to your head and you must do what you feel comfortable with.

Many forex signal providers will send you an email at the end of each day (typically at the end of the New York Session) and will advise you on the various trade entry levels for the next days’ trading.  Most signal providers will advise that you trade during the London and New York session as these are the sessions where the market is more volatile and you are more likely to make forex profits.  The Japanese session is typically the most stable of the three and unless there is a release of prolific market news you will be unlikely to see massive gains during this session.

My advice to anyone searching for a reliable forex signal provider would be to select one that aims to close out its trades by the end of the trading session, especially if you have a smaller account and are trading in micro lots.  Take your profit where you can, only take risks where you can afford to lose money and remember if you do not think the trade is viable, don’t make the trade!  If you want more information or to test a trading signal provider, follow the link for a 60 day free trial of one of the ones I believe can provide some decent signals for you to test your toes!

Support and Resistance – the two key words

To really understand the behavior of a currency on the Forex market it is important to see how it has behaved over a period of time. Taken over the course of a very short space of time, it is possible to make data mean just about anything. This, in turn, means that the data will be almost worthless. Over a longer period of time, however, patterns always seem to assert themselves, and establish a firm basis for predicting the future behavior of a currency price. Among the most important figures that appear in a pattern are the support and resistance points.

The point of “support” for any currency is the price level beneath which a currency never trades – effectively its market “bottom”. Whenever the price reaches this level, it almost always bounces back upwards, and for this reason many people will invest when a currency hits that point. Conversely, the “resistance” point is the traditional high point of a currency price, above which it never trades. If you are looking to cash out, this is a good reference point.

Of course, the old saying “there’s a first time for everything” exists for a reason. There will come a time when a currency breaks its support or resistance levels, and this is seen as hugely important. When a currency does this it will be expected to continue this trend, possibly for an extended period of time. It is therefore a good time to get “in” if it is rising or “out” if it is falling.

Technical Analysis of the Forex Market

Along with fundamental analysis, technical analysis is one of the two main methods of informing oneself and building a stronger position to profit from the Forex market. While fundamental analysis allows you to predict the movement of a currency by looking at the political and economic position of a country, technical analysis has more to do with looking at collected market data and using it to predict future movement. This is an approach that is very commonly used on the stock market, for example, where historic data is the single most important part of predicting future performance.

While a fundamental analysis will look at the reasons for market movement – allowing us to know why something happened – the technical analysis of the same market will tell us exactly what happened. That is to say that it will give us the raw data. Fundamental analysis requires an extremely broad view and, for those who are disinterested in politics, can be overly time-consuming. If these people are strong technical analysts, they can usually learn enough from the movements themselves. Whatever the reason for a movement, the fact is that currency prices follow trends.

Regardless of anything else, people know that patterns have emerged in how foreign currencies behave, patterns which have held true for more than a century. These patterns mirror human behavior – one of the few constant things in the world – and therefore are an excellent way of predicting the future. You may not know who the President of a certain country is, but if you know how its currency performs over a period of time you are well within your rights to not care.