Do you trade the Forex markets? If so, whether you realize it or not, you are using Forex signals to determine what, when, where and how to trade. You might be a long-term “buy and hold” type trader or you might be a day-trader or scalper. You might be trading spot Forex in the cash markets or you might be trading Forex futures or options on an exchange. Whatever you are doing in the markets, if you are trading, you are using signals.
Basic definition of a Forex Signal
Photo by Trading Rich MomAt its most basic, a Forex Signal is whatever has triggered your decision to make a trade. So whether that trigger happens to be a sudden outbreak of war, a tick on a price chart or just a gut feeling, it’s a signal!
However, in the real world of trading, Forex signals are most often associated with technical analysis of price movement charts.
One man’s meat is another man’s poison!
The interesting thing about the Forex markets (or any markets for that matter) is that signals can be interpreted in vastly different ways depending on your outlook. If two traders are looking at the same price chart, but Trader A is a short-term scalper and Trader B is a long-term investor, what they both see on that chart could be diametrically opposed. Trader B might see a price uptick as the signal to enter into a long-term position, whereas Trader A might see it as an opportunity to go short for a few minutes or hours. And that’s what makes markets! For every buyer, there has to be a seller (and vice versa).
Using the right signals for the way you trade
It is vitally important that if you are using any kind of system to generate trading signals, you configure that system to match your trading approach. Universal Forex signals don’t exist, so use what is right for you!
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