How to make the most of forex signals
I want to give some tips and advice on how to maximize their profit when following our signals. Forex signals are trade recommendations and ideas. When someone registers for a signal providing service they have full control over their account. Signal providers don’t trade your account; you trade your account. It can maximize the benefits which come from the synergy of the signals and combine with your skillset. If you´ve been in this business for some time, you might have some sort of trading knowledge and you always have our forex strategy section to help. Here are the tips:
Extend the take profit target – Signal providers usually have a fixed amount of pips as a take profit target. Our default take profit targets are 25 pips for short-term signals and 80 pips for long-term signals. We may alter the targets sometimes, but 95% of the signals are issued with these targets. Once we open a signal, we rarely change them because the followers might not notice the change. But the winning potential for some trades might be bigger than the profit target of the signal. On such occasions, when you feel a trade might run further, you should add another 10, 20 or more pips to the take profit target of the signal.
Extend the stop loss – Like the previous method, you can also play around with the stop loss. Apart from having fixed take profit targets, the signal providers have fixed stop loss targets. But sometimes the stop loss provided with the signal might be just below a resistance level or a moving average. So if the price is getting close to the stop loss it would be better if you move the stop above that resistance level, which might save your trade. Or, if you think that an event will send the price in the opposite direction of your trade, close the open position. You should do this before it reaches the stop loss. If you are following a GBP/USD sell signal and good economic data from the UK will send this pair higher, it´s better to close the signal at a small loss. If you wait until the stop loss, you may lose quite a lot of pips.
Removing the take profit – Often the markets follow trends. This is true especially after news releases. It means that the forex pairs move in a certain direction for hundreds or thousands of pips, which might happen in a couple of hours or in a few weeks. Even if we open two or three consecutive signals during these events, a 50-75 pip profit is just a fraction of the potential profit. So, if you think that a trend is beginning to form, I don´t see a reason to close the signal at 25 pips profit. In this scenario, you can use the forex signal only as an entry point signal and remove the take profit target for your trade. This lets the trade run as long as possible. Once the price goes 40-50 pips in your direction you can place the stop loss at breakeven. It will trail it 50 pips away from the price in the right direction.
Remove take profit during strong trends.
Pick a better entry – We try to pick the best entry price when selecting a signal. Once in a while, we might jump the gun a little early because the market has quieted, only to see the price go 10-15 pips higher after we opened a sell signal. If you think that there´s still room for the price to move higher when we issue a sell signal, you had better wait a little longer for the best entry price. Sometimes signals miss the take profit target by a few pips. If you wait until the price gets a few pips higher before selling it can make the difference.
Cut the losing trades short – In this business, you cannot always predict what will happen next. A sudden political occurrence or a disappointing economic piece of data might turn the things around in a moment. When such events occur and the stop loss is going to get hit, you might as well close the trade right there at a small profit or a small loss. After all, you are in charge of your trade so you have the option to close it whenever it feels right.
Scale in and out – If you are a follower of our signal service you have seen that we issue 90-110 forex signals a month. Some of them are obvious and will end up hitting take profit while others might be a little more uncertain. After all, you can never be 100% sure in this game. You can increase the lot size on the signals that have a higher probability of success and scale out on the ones with lower probability. All we can do as a signal provider is to provide trade ideas and recommendations. The money management and the amount of risk you want to take is up to you. Traders can play around with the lot size according to the probability of success of every signal.
You should choose a weaker/stronger correlated currency. When you receive a sell signal on a forex pair it might be wise to scan the correlated pairs to check if there is a weaker pair. For instance, AUD/USD and CAD/USD correlate most of the time. But, once in awhile one of the pairs might be a little stronger than the other on an uptrend or weaker on a downtrend. This is because their economies are affected by the same factors (they are different countries after all). We issued a sell signal on AUD/USD because this pair was overbought and the candlestick formation looked favorable for a short. If you look at the daily chart, the Kiwi has been weaker than the Aussie, but we decided to sell the Aussie because of the above reasons. If you took a glance at both charts and decided to sell the Kiwi instead, you would have a winning trade in about 15 minutes, since it declined faster than the Aussie. Our AUD/USD sell signal hit the take profit target but not until a couple of hours later, so you could have opened another trade during that time.
Include the spread – We sometimes receive emails from our followers asking why our signal is still open while their trade is closed. They also ask why some of our signals and their trades show a different closing time. That´s because they don´t include the spread in the trade. When you follow a forex signal you must calculate the spread as well when placing the stop loss and take profit. For instance, if we issue an AUD/USD sell signal with stop loss at 0.7350 and your broker offers 2 pips for this pair, then you should place your stop loss at 0.7352. Different pairs have different spreads, so you should adjust the stop loss for each pair when opening trades. We also tell you about variable spreads, and whether you should stay out of the market during important news releases. The spread might widen at these times when the volatility is high.
As you can see, there are many ways to make the most of the benefits that come from forex signals. You can maximize your profit by extending or removing the take profit altogether and let the trade run its full course. You can also pick a better entry point or increase the lot size. You can also cut your losses by cutting losing trades short or manage the stop loss. Another option is to choose a pair that is more correlated instead of the one in the signal. As we said from the beginning of this article, signal providers only provide trade recommendations. You have to take care of everything else like money and risk management, opening and closing and tracking the trades. You are managing your account so you have to put the least amount of logic and reasoning as well to your trades to maximize from a forex signal service.
As mentioned above, we are not here to pick a winner between manual and the automatic signals. There are several signal providers, with successful and unsuccessful signal providers on both sides. The automated trading reached a peak in late 2000 but has declined by more than 50%. with manual signals, traders have a greater chance of winning and the trading volume is lower. Anyone who is looking for signals should weigh the options and choose the most suitable signals. You can also decide to use both to maximize the benefits. When the markets are volatile, consider following automated signals. When markets are more logical you can follow manual signals.