| | One of the disadvantages of FOREX trading is the
time investment needed to monitor the markets for advantageous entry and exit
points. It's possible to sit in front of a computer monitor for hours watching
the markets.
Of course, you can use automated orders such as limits and stops. These allow
you to walk away from your computer with the knowledge that your losses will be
kept to a minimum, but by doing so, you may miss out on potential profits
because your limit order kicks in too soon.
If you don't have the time to watch your computer monitor and still wish to
achieve as much profit as possible, consider signing up for a FOREX signal
service. These services monitor and analyze the market for you and send their
findings directly to your computer desktop, email, or SMS on your cell phone or
pager.
Companies that offer FOREX signals do so on a paid basis, so you have to sign up
and pay a monthly or yearly fee. Some brokers may offer this service as an
extra which integrates into their trading software. You can receive signals as
a popup on your screen or by any of the other methods described above.
There are usually a limited number of currency pairs that are available for
FOREX signals. Most services offer signals on EUR/USD, USD/JPY, GBP/USD, USD/CHF,
but specialized services may offer other currency pairs.
FOREX signals are primarily based on technical analysis of market conditions. Most companies use a combination of indicators to identify main trends and entry
and exit points. The results are sent to subscribers who have the option of
acting on them or passing. Some services will even execute the trade for you.
Using a variety of technical studies, various types of signals can be derived
from currency charts. The SMA (Simple Moving Average) indicates buy signals
when currency prices rise above the average line. Sell signals occur when the
price falls below the moving average line.
MACD (Moving Average Convergence Divergence) studies have a signal line that is
used to generate a buy signal (above the line) or a sell signal (below the
line).
Volume indicators are used to determine market interest. High volume
(especially near the bottom of the market) can indicate the start of a new trend
while low volume indicates investor uncertainty.
Bollinger Bands indicate potential changes in the market. Sharp price changes
tend to occur when the bands tighten while prices that touch one band tend to go
all the way to the other band.
Other indicators like volatility and momentum can be used to reinforce signals
provided by other sources. Taken together they form a relatively reliable
source of information about how the market is behaving.
Are signals a sure thing? Of course not, otherwise we would all be
millionaires. Signals can give you good advice about which currencies to trade,
but no signal service will guarantee their information is 100% accurate. Reputable services will show you their track record, however, and let you see
for yourself how they have done in the past.
FOREX signals cost anywhere from $50 to $200 a month. It's up to the individual
trader to decide if the cost is worth it. Don't think that signals can take the
place of trader education – they are advice, and if you don't have the knowledge
to analyze the advice, you should go back to the books before using a signal
service.
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