Understanding Forex Signals to Use as Trading Tools

June 10, 2009 by  
Filed under Forex Trading

If you’re new to the world of Forex trading, you already know that fluctuations in these types of markets are the most volatile and unpredictable available. In fact, many seasoned investors aren’t able to handle the extreme lows and drastic highs that can reverse at any second. However, there are a few signals that can clue you in on your possible next move to prevent any drastic losses in your next trading session.

These signals in the Forex markets can be used as buy and sell indications, derived through very technical analysis. Don’t be discouraged, though – with a little practice, even a novice can learn to recognize these signs.

Using historical price and volume data can provide a mathematical and statistical trend, and as everyone knows, history is bound to repeat itself. This is also true with Forex trading! Using these analyses can help you determine where the market is likely to go, and what your next call should be and when to place it.

Analytic companies can be found everywhere, and many will offer to send you texts or emails warning of upcoming call signals. These messages could just tell you to buy yen at a certain value, or if you’re using software or a website, it could be flashing color-coded signals to you.

One of the indicators used commonly to derive these signals is the Moving Average Convergence/Divergence, or MACD. Just like it sounds, the moving average, or changes in price over a specified period of time, will cross a pre-determined threshold – this tells you to either buy or sell at that specific moment.

You may also enter orders for certain signals in order to prevent you from having to sit in front of the computer screen all day. If you want to sell euros at 1.20, you enter this information, and leave to do whatever you need to. If your call threshold is met while you’re away, the currency trade is performed on your behalf.

Any type of Forex trading tool is created to help the wise investor to avoid drastic losses that can be life-altering. This means that even if you have the option to perform automatic calls, this should never be relied on for regular Forex trading purposes. You need to stay informed, educated and behave appropriately in order to cruise through the highs and lows of the world of currency trading.

Signal software and services do make deriving the information you need to know from standard charts much easier, and provide you with a wealth of information with a mere glance. Just as with any other convenience product available, these systems come at a price.

Most will range from $50 to $250 per month, depending upon your level of membership. Others may charge $500 to $3000 to purchase the software outright, but you don’t have any monthly charges after that. Determine which signal methods will fit your needs best, and invest wisely; these tools do come with a charge, but you know the old saying – “You have to spend money to make money!”

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