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A Forex signal is a suggestion for entering a trade on a currency pair, usually at a specific price and time. The signal is generated either by a human analyst or an automated Forex robot supplied to a subscriber of the forex signal service. Due to the timely nature of signals, they are usually communicated via email, website, SMS, RSS, tweet or other relatively immediate method.
Types of services
Services provided fall into four categories:
- Unpaid/free signals
- Paid signals from one provider whether by personal analysis or algorithmic analysis
- Paid signals aggregated from multiple signal sources or ‘systems’
- Signals supplied by trading software located on the trader’s computer, also known as a forex robot or EA (expert advisor)
Typical features offered by Forex signal service providers
The main services offered by forex signal suppliers are:
- Exact or approximate entry, exit and stop loss figures for trades on one or more currency pairs
- Supporting graphs and/or analysis for the signals
- A trading history showing the number of pips profit/loss per month and/or the risk/reward ratio and actual trades. Sometimes (especially in the case of forex robots) this may be shown as back-tested results
- One-on-one coaching, or additional interaction with the signal provider such as comments, forum, etc.
- Account management whereby a subscriber’s account can be traded by the signal provider
- Educational resources either via the internet or phone
- A trial period for a lesser price
Although these are the main features of a signal supplier, not all of them offer the complete list of services.
Scams and fraudulent activity
As forex is popularly touted as a get-rich-quick method there are a number of services that supply signals of debatable quality, which do not answer the users’ expectations for profits. The easiest way to spot a possible scam is to analyze the rates of return being claimed. Any unreasonably high amount is likely to be attributable to a short term winning streak during a specific time frame or or through other dubious statistical methods. It is unlikely that any trading system that significantly outperforms the market with large, repeatable returns would ever be sold. There would be no reason to do so.
Methodologies and trading strategies
The majority of signal providers focus on supplying signals based on scalping.
- Foreign exchange autotrading
- Foreign exchange controls
- Foreign exchange hedge
- Foreign exchange reserves
- Forex Autotrading
This article uses material from the Wikipedia article Forex Signal, which is released under the Creative Commons Attribution-Share-Alike License 3.0.