Forex signals are predictions in the market generated by other traders. Whether that be through technical, fundamental, or economic analysis etc. Some traders may share this analysis beforehand to help people understand the reasoning for the trade. The signals are then sent to a community in a simplistic format so that others can follow.
How Forex Signals Work
A signal usually consists of the pair in question and whether it is a buy or a sell. The point of entry, whether that be the current market price or a limit at a different price, which will be triggered if reached. It will also contain a take profit (tp) which is where the signal provider aims to close in profit and a stop loss (sl) which is where the trade will be closed in a loss if the prediction is wrong. From here you can work out the lot size for your trade by putting the figures into a lot size calculator, a guide to this can be found in 1st2notify’s discord.
When the signal provider is comfortable, they will usually alert you to take some profits and put the stop loss to breakeven making it a risk-free trade. Certain traders may average 1-2 trades per week whereas some traders may average 2-3 trades per day, this depends on their strategy and the market.
Personally, I found it quite easy to get the hang of copying signals after practicing on a demo MT4 account for around a week.
Key Things to Know About Forex Signals
A key thing to note about forex signals is they are purely a prediction in the market; therefore you should never risk more than 0.5-1% depending on the signal providers trading style. It is also important to you keep your risk as consistent as possible as doubling your risk after a win or halving your risk after a loss could be costly, you need to think long term and follow your rules. To do this it may help to understand the providers strategy which will help you trust and understand the trade.
When taking forex signals it is key to become emotionless, although at first this may be hard, it is just as important as knowing how to trade. This is because many strategies can be profitable, however it is up to the person to have the discipline to keep on track. The number of times I have heard people failing accounts due to a lack of self-control and discipline is much higher than people whose strategy simply does not work. Whether this be from chasing losses or doubling down on trades, that is where trading becomes gambling.
Benefits of Forex Signals
A clear benefit of forex signals is bypassing the years of hard work developing a strategy, the average profitable trader takes around 3 years to get there, bearing in mind that 70% never get to that point. So if you can manage to find someone who has put in that work and is willing to share their knowledge then I would consider yourself incredibly lucky.
Another benefit of forex signals is being able to take a backseat. You have two options, either learn the providers strategy alongside taking their calls with the intention of being able to trade for yourself one day. Or you can simply follow the trades while continuing with everyday life. This allows you to possibly generate another source of income without changing your day-to-day life, whereas many other incomes take a lot of time. In addition to this, certain community’s offer a copy trading service. This is where you can connect a broker to your chosen trader within the group, meaning that you can follow trades with no interaction at all. Which also helps if your just getting familiar with trading.
In spite of this, it is key to note that signal/ signal providers cannot guarantee profits and past performance is not a definite indicator of future performance. To get a good indication of a trader you may want to follow them on a demo account for a month or so which is what I have done in the past. Learning from a mentor/ learning your own strategy is the best scenario, although this takes years of hard work and persistence, it can be beneficial in the long run as you will be completely in control. And once mastered is a valuable skillset.
How to Find Good Forex Signals
Nowadays there are thousands of signal givers to choose from, unfortunately only few make consistent profits. Although there’s countless people on social media flaunting a luxury lifestyle seemingly provided by trading, it’s important to note that many of this is a ploy to get you onboard. So in order to find a genuine trader, I would look for someone who you can interact with and is transparent. This allows you to ask questions and learn from them. A few traders will livestream themselves trading, giving a sense of transparency that many of the shady providers won’t offer.
Also I would look for someone who posts their statistics, this was major for me when I was looking for the right group as seeing stats from up to 2 years and being able to go back and verify this was a huge step up from previous groups.
How to Avoid Bad Signals
To avoid bad signals I would look for genuine traders who you can trust... In one of the first trading groups I joined there was no real names no faces and essentially no trust. It is easier to be a salesman rather than a trader and therefore some people spend time running a discord purely just to keep you convinced your “with the winning team” whether that be repeating it constantly or exaggerating their wins. Joining 1st2notify is what made me realise there is a lot more to trading groups. From being able to watch the provider trade live on YouTube to being able to have a 1-1 call with the staff I see many qualities that other groups do not have. Not to mention the constant stat updates on wins/losses.
Keywords to know when taking signals:
- TP = take profit
- Sl = stop loss
- BE = break-even
- Long = buy
- Short = sell
- P&L = Profit & Loss
- DD = Daily Drawdown
