Forex trading- a brief explanation
Forex or foreign exchange trade is one of the most volatile and opportunistic markets in the international economic platform. Even though the price movements are very much uncertain and one can land himself with a bad deal, proper strategies and in-depth knowledge about the marker will make the deals profitable.
In this market, the international currencies are exchanged in pairs. It is because a particular currency, say USD will be either sold or bought in exchange for AUD. Since two different currencies are involved in a single transaction, forex is all about currency pair trades.
Every trader needs to speculate the quoted price of a currency pair based on the current factors affecting the price movement, and the bid and ask prices. Based on this speculation, one has to open a position in the market. A trader can either go long by speculating a price increase or he can go shot with just the opposite prediction. As long as you are making profits, your position will remain open.
If you want to stop the trade or avoid any further loss, you will have the option of closing the position and settling the trade. Forex is the largest trading market currently with a total trade volume of nearly $5 trillion per day. On account of this, you being a forex trader must know about the current market scenario. And this can only be done by tracking and reading the forex signals.
Forex signals- introduction to the most helpful analytical data
Forex market is highly volatile as the currency pair prices are always subjected to movements. The support and resistance times are highly unpredictable and that’s what can turn the trades against you. Moreover, since forex markets involve the currency price movement speculations, traders can easily make mistakes in predicting the wrong price.
It is for this reason that analytical tools are needed. These tools allow the traders to analyze the fundamentals factors affecting the movements along with determining the technical attributes to find the proper opportunities for a trade. One such analytical data is the forex signal.
Presented either in the form of news events or graphical representations, a forex signal portrays the happenings in the market at a given time. Starting from knowing about the prospective entry and exit points to the probable factors affecting the currency pair prices, with proper deduction of the signals a trader can get several details.
Using the signals is very important in forex trading. As the market is highly dependent on the supply and demand chain of the global economy and politics, the currency prices are subjected to aggressive changes. This is what can be traced on the reliable forex signals, thereby ensuring your speculations are correct in terms of the position you have opened in the market.
Manual VS automatic forex trade signals
The forex signals can be greatly classified into two main categories- manual and automatic signals.
· Manual forex signals
Manual signals are generated by the traders or experienced analysts who have a better understanding about the forex market. Even though manual signals are easy to read and understand, there are several rooms for errors, and that’s why for long term trades or higher leverages, such signals are not recommended for use.
· Automatic forex signals
The automatic signals are generated by software platforms. These platforms accept a series of inputs on behalf of the traders and after processing the data pieces, the software generates the forex signal at par with the market conditions. Automatic signals are highly accurate and hence, the errors are reduced to the minimal number.
Advantages and disadvantages of forex signals
· Proper knowledge about trading opportunities
With the trade volume per day being so high, it is not possible for a trader to understand the statistics and volatility of the market easily. It doesn’t matter whether the trader is a beginner or an expert since mistakes can happen from anyone. This is where the signals come in. The graphical representations help them to understand the opportunities they have in a current market scenario, be it in terms of currency exchange or price speculations.
· Probable reduction in risks
Forex market might be a profitable platform. But, it will be a foolish decision to rule out the risks associated with the trades and transactions. Most risks are associated with the failure of understanding the market and the relevant attributes. This is why traders refer to the forex signals to mitigate the risks, starting from the transactional risks to the leverage risks.
· Appropriate position opening
Some providers generate entry-point and exit-point forex signals. These are used to identify which market condition is preferable for opening a long or short position. At the same time, you can also know when you need to close the opened position to preserve your profits and settle the trade. These signals are highly helpful for day traders and position traders.
· Continuous market monitoring
You wouldn’t have to rely on other sources to know the happenings of the forex market. With the signals in hand, you can compare the market and your trade to understand and assess the odds. You can also know how the currency prices are changing and what factors are influencing these movements.
· Offers a quick curve for learning
One of the major benefits of using the forex signals is that they offer a quick learning curve. If you are an amateur trader, you can use the signals to understand the real-time events in the forex market. This will help you with your future trades.
· Discontinuity in precision
Even though most signals are accurate, one cannot ignore the fact that these signals are not hundred percent precise. One way or the other, the forex signals will have flaws which is why sometimes, your analysis of a concerned signal might land you in jeopardy with a trade.
· Delay in signal generation
If somehow your chosen signal provider fails to generate the signal on time or if you fail to receive it on time, you will lose several opportunities. As a result, you might suffer from losses due to delayed closing of a trade which was going against you. You can also miss an opening position if you receive the signal late.
· Subscription fee included for more exposure
Since the free signals do not usually provide every information, sometimes, it’s better to apply for subscription so that you can avail the premium packages. Yes, indeed a subscription will provide you more exposure to the market but the premium packages are not cheap.
Forex signals can be considered as a bridge between the traders and the market. It offers you an in-depth knowledge about the trades happening globally and the price movements. With a proper signal provider, you will be able to keep a track of the forex platform and grab the best opportunity for yourself.