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What are Forex Trading Signals?

Forex trading signal systems are used by Forex traders all over the world to aid them in making critical decisions about their trades. They are one of the most important tools a forex trader has and almost all traders choose to use them in one way or another. There are many types of forex signals systems, some are offered for free while others for a fee but take in mind that a trustworthy service should include information about take profit and stop loss configurations.

What are Forex Trading Signals? - FX Leaders
Ensure that your forex signals provider gives you information on stop loss and take profit levels

How are Forex Signals Generated?

Forex trading signals are generated in two ways: automated and manual. Automated forex signals are published by trading software developed by professional traders in conjunction with code developers. They leverage various technical indicators to analyze historical data on the price action of currency pairs to identify trends which they then send out as trade recommendations. Trading using automated signals is also known as algo trading and is usually leveraged for placing short-term trades.

Manual forex signals are published through analysis performed by professional traders and/or analysts, who conduct market analysis to identify trading opportunities. They then use technical indicators on the charts to identify entry and exit levels for the trade recommendations they find. Unlike automated market signals, the manual ones leverage human intelligence and intuition, use fundamental analysis to trade the news and/or the market sentiment to discover promising trade ideas.

Manual signals differ from automated signals as they usually recommend larger take profit targets and, as a result, they are able to offer better risk to reward ratios on their recommendations. Published by humans, manual forex signals are also far more adaptable to sudden market fluctuations and volatility, as signals providers can extend the take profit targets on trades that are going well or manually close signals that go against the original recommendation, offering a chance at higher profits and lower losses.

On the other hand, automated forex signals remove the human element from trading and provide recommendations with no emotional attachment whatsoever, which sometimes works out well in the world of forex trading. They are also back-tested to instill greater levels of confidence in their systems. Unlike manual forex trading signals, the automated ones can execute trades at a faster speed and can offer signals on a wider range of instruments than a manual signals system.

What are the Most Common Forex Signals?

A quick search online will show you just how spoilt for choice you are when it comes to selecting popular forex signals services to depend on. With so many different trading approaches, there are several options for you to choose from, including:

  • Manual forex signals – You can get manual signals from online communities of forex traders, forex blogs and even social networks, especially Twitter, Facebook and Telegram.
  • Automated signals – Such signals are published by trading algorithms or forex bots and their services are available on payment.
  • Automated manual signals – These trade recommendations are typically shared by leading banks, pension funds, hedge funds, companies and even some online signals systems. Some leading forex brokers that offer integration with social trading networks like eToro and ZuluTrade also publish these kinds of signals. You can also access automated manual signals via the MQL network, from where you can copy trades recommended by professional traders or trading software.

Pick a service that you are able to understand well, find comfortable to use and is compatible with your requirements, i.e., offers ample signals for the currency pairs you like to trade and provides enough trade recommendations during your active trading session. You also have the option of signing up for more than one service, so you can opt for both automated and manual signals to help you become a better forex trader. You can rely on automated signals when the market seems highly volatile and when the market moves in a more logical, predictable manner, turn to manual signals instead.

How do FX Signals Systems Actually Work?

Every Forex trading signals system is unique and relies on a different analysis of the market but overall there are two main methods which guide the market experts who produce the signals.

The first is a technical analysis of the market including all the past information about the price and trend that is available. The second is based on current events and the analysis of how they might affect the price action over short and long periods of time.

Some signal systems are based on an automated computer analysis of the market. An experienced trader teaches the automated system to react to different events and the system produces the signals on its own. A major upside of this kind of system is that it excludes the negative effects of human psychology which might affect a human’s judgment and cause him to make a wrong decision. The downside is, of course, the loss of actual human judgment and the inflexibility of a computer system.

Read more about How to Use Forex Trading Signals.

Our Signals System

The FX Leaders signals system is based on trading analysts who insert their decisions directly into the system and turn them into buy/sell signals. We base our signals mainly on technical indicators which are followed very closely by our experts alongside with a fundamental analysis of the market and trend. ‘Support and Resistance Levels’, ‘Fibonacci Levels’, ‘Bollinger Bands’, ‘Breakouts’, ‘Moving Averages’, ‘Oscillators’ (trend determiners), and ‘Stochastic Lines’ (overbought/oversold indicators) are the technical indicators favored by our analysts.

Fibonacci levels - FX Leaders
The Fibonacci indicator is one of the trading tools in our arsenal.

Test Your Skills – Open a Free Demo Account!

Consider testing your skills on a demo account before purchasing access to a signals system so as not to throw your money away. At FX Leaders, you can get access to an advanced and professional signals service for free! Sound alerts, live email and mobile notifications, entry price, and signals performance reports are some the awesome features available to FX Leaders’ premium account users.

Two-signal snapshot for: What are Forex Trading Signals - FX Leaders
FX Leaders’ trading signals terminal

The typical routine is to receive the trading signals directly to your e-mail or to your phone by a text message. This routine improves your ability to track your trades and ensures you don’t miss buying/selling opportunities because you didn’t notice them or because you were too late.

Signal systems have become very popular among forex traders and yet we encourage you to verify the trustworthiness of the system before making an expensive commitment. As mentioned above, using a free signals system with a demo account is a great way to test your ability to earn money before risking any real money out of your pocket. Once you feel comfortable that you can earn money with your demo account feel free to move on to a real account and make some real money.

Keep in mind that signal systems are not compatible with all time frames. Scalping is a method that will not work with signals as the signal will already have closed by the time you see it. When working with a signals system consider trades with longer time frames as that is where they are most useful.

The currency pairs which provide the greatest challenge for analysts are GBP/USD, USD/CHF, USD/JPY and EUR/USD. All signal systems have flaws and none are accurate 100% of the time. Use these forex trading signals as a tool to better your trading system but do not rely on them fully as they are only one piece in an intricate basket of tools and strategies which make up a successful trader’s trading toolkit.

About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.