Many well-known Forex brokers offer their customers an additional service in the form of delivery of trading signals. In addition to brokers, many well-known Internet sites and blogs (which are often conducted by practicing traders) offer their trading signals. Someone provides trading signals for free, someone for a fee. Brokers are usually ready to provide signals provided that they open and replenish their trading platform account.
What is a trading signal?
This is just information about when on which financial instrument and in which direction the position should be opened. It is understood that the supplier of trading signals carries out a serious analysis of the market, based on which it issues them.
What are trading signals for?
- If you find a really good signal provider, for example, a professional trader who has been a stable trading platform for several years, then his signals can be very useful.
- Working on such signals, you can make a profit in a percentage ratio comparable to the profit of this trader.
- However, in this case, it will not be enough for you to accurately and consistently follow the received trading signals. Also, it is imperative that you strictly adhere to a specific money management system (Money Management). After all, no matter how accurate the signals you receive, you should always have a certain margin of safety.
- By a margin of safety, I understand not only the size of trading capital but also the percentage of risk that is laid down for each transaction concluded.
Are there accurate trading signals
What is accuracy in trading? The whole process of exchange trading is built on forecasts, and the forecast, whatever one may say, may not be accurate in all 100% of cases. However, the ratio of 60/40 (where 60% of profitable transactions, 40% – unprofitable) will be considered good accuracy for any trader. Naturally, the ratio of the levels TAKE PROFIT (tp) and STOP LOSS (sl) for all 100% of transactions should satisfy the condition tp> = sl.
So, signals of sufficient accuracy certainly exist, but finding a supplier of such signals is quite difficult. Besides, even having found such a provider, you should be prepared for the fact that about half of all the deals recommended by him, as a result, turn out to be unprofitable.
Outlets of emergency exits from trade
It would help if you were prepared for the fact that at one point, a whole series of losing trades will follow. And of course, you always need to have a so-called emergency exit plan.
By an emergency exit plan, I mean a series of conditions or a combination of circumstances in which you should immediately stop trading – take a timeout. For example, this can be done for a given number of losing trades in a row, or when trading signals capital is reduced to a certain critical value.
However, here, it should be borne in mind the fact that if the signals are delivered by a really good and sufficiently experienced trader, then for a stable income from them, it will be enough only to manage your trading signals capital properly.
An experienced trader, as a rule, always crawls out of losses, and therefore, having jumped off the train ahead of time (leaving emergency), you run the risk of missing many truly profitable trades. So here you have to find a compromise.
Automatic and manual trading by signals
You can trade by trading signals in automatic and manual mode. Automatic mode involves the installation of special software that receives signals from the selected provider and opens the corresponding positions without your participation. You may only be required to initially configure the program for an acceptable level of risk (determine the size of the positions to be opened in accordance with your money management strategy).
Manual mode assumes that you receive a signal in person (for example, as an SMS message), and then you decide to open or not open a position on it. The manual mode may involve certain analytics of trading signals.
Although fully automatic trading signals free a trader from many routine actions, it also has many disadvantages. Among which, for example:
- Failures due to a poor Internet connection or accidental disconnection (this often happens even with the most stable Internet providers);
- Failures due to equipment malfunctions (computer, server);
- Failures due to a flaw in the software used. After all, it is far from the fact that the trading robot you are using will respond equally adequately to all possible market situations. Even if it is thoroughly tested, it is almost impossible to foresee everything.
In this regard, and also due to the possibility of analytics and filtering of frankly stupid trading signals, in this case, manual following the received trading signals will be more preferable.