Get to know the Various Types of Forex Trading Signals

There are many profitable trading opportunities in the forex market, but unfortunately we often don't have enough time to take advantage of them due to the varied daily activities.

In situations like this, subscribing to trading signals is one of the solutions that you can take to continue to be able to profit from the forex market, without having to always stare at the trading platform 24 hours a day.

However, in cyberspace there are many forex trading signals circulating, both free ones with certain conditions and those with a paid subscription system.

Among the trading signals, it is not uncommon for them to be fraudulent. Forex trading signals come in many types. How do we choose the right trading signal for us? The first thing we need to do is recognize the characters and types of forex trading signals.

Types of Forex Trading Signals

Various Types of Forex Trading Signals

Getting to Know Forex Trading Signals What are "Forex Trading Signals?" Forex trading signals are suggestions for buying or selling certain currency pairs at a certain price level and for a certain time period.

Forex Trading Signals are sent by signal providers to their clients to assist clients in trading the forex market. The exit and entry signals are sent based on an analysis of the movements of currency pairs based on a certain strategy.

The most commonly used analysis is technical analysis, but there are also a number of signals combined with fundamental analysis. While the strategy usually varies from one trading signal to another; some use scalping, swing trading, martingale, and so on.

There are certain brokers who simultaneously provide free forex trading signal services to their clients, and some also offer forex trading signals at a certain rate. 

However, forex traders can also buy forex trading signals from trading signal providers on the internet independently, or create their own trading signals. Each signal provider has a different strategy, so the accuracy of the signals provided varies. 

Forex trading signals can generally be classified into three categories: 

1. Auto-executed signals and non-auto-executed signals. 

2. Signals sent by software installed on the trader's computer, and signals sent by third party systems.

3. Signals generated based on a person's personal analysis, and signals generated based on certain algorithms.

Signal Forex

Automatic and Non-Automatic Executed Signals

If a trader uses a trading signal that will be automatically executed, then he only needs to subscribe to the signal, install the settings according to the instructions, then hire a VPS service to ensure that the computer can be online 24 hours.

After that, he can sit back and watch his signals work his entry and exit, harvesting pip by pip. Trading signals will be executed immediately on the trading platform, so traders only need to leave the computer on and monitor it occasionally.

The downside of this automatic execution is mainly the durability of the internet connection and electricity. The computer used for trading must really be "alive" and online 24 hours a day, 7 days a week.

Because open and close positions will be carried out continuously without knowing the time, and if the trading platform "dies" in the middle, there is a risk of an open position. not closed, or missed a profitable open position. 

Therefore, users of forex trading signals with automatic execution are advised to rent a VPS that is located as close as possible to the trading signal server to avoid slippage and delay. For this reason, a number of signal providers offer their own VPS rental services.

Meanwhile, signals that are not executed automatically will send entry and close signals via email, SMS, or an alarm directly on the trading platform, to forex traders who are their clients. The signals sent must then be executed by the trader himself within a predetermined time period.

Note that the signals won't last very long and will only be valid for a short time, after which they will quickly change again. For example, signal providers send open and exit signals to their trading signal subscribers in the following way:

The first signal is sent to traders at 10:00, and this signal will remain current until 12:30. Traders will receive the second signal at 12:30, which will remain current. until 15.00. And so on. The trading time in those signals is usually sent according to GMT time. You have to adapt it to the time where you are.

Signals From Software And Signals From Third Parties

Signals from software that has been installed on a trader's computer are also often referred to as expert advisors (EA). Many EAs are offered for free on the internet, some are also offered for a price tag. However, forex traders can actually make their own EA by using the EA, MQL4, or MQL5 generators. 

Of course, the reliability of each EA varies. Therefore, before using an EA, traders usually do a trial run, backtest, or ask for proof of a real account from the EA provider. From this evidence, it will be seen how the EA's performance is in a certain period of time.

See also: Start trading with an Expert Advisor. The main weakness of EA is its dependence on technical analysis. Because EA is clearly formed from technical analysis, it tends to ignore fundamental factors.

As a result, EA users can experience sizable losses when unexpected movements occur due to fundamental news releases. In fact, there are a number of brokers who prohibit the use of EA on the grounds that EA can disrupt the system at certain times.

But lately there have been several new generation commercial EA's that have a feature that can automatically stop trading when there is news with a big impact on the fundamental calendar (High Impact News Filter). On the other hand, signals sent by third parties, as the name implies, do not originate from software such as expert advisors. 

One example of a forex trading signal of this type is the signal sent by traders in social trading networks. In addition, there are also signals sent by independent signal providers via SMS or email. Signals sent by third parties can come from the personal analysis of an experienced forex trader, but they can also come from algorithms.

Signals Based on Algorithms

Signals Based on Personal Analysis and Signals Based on Algorithms

Most of the signals circulating on social trading networks are signals that come from personal analysis of lead traders. The lead traders make buy and sell transactions, open and close orders, then these actions will be copied automatically or selectively (not automatically) by their "following" traders.

Because it is done by an individual, this kind of signal is vulnerable to the emotional influence of the signal provider. However, signals resulting from analysis like this can combine technical and fundamental analysis in a more comprehensive manner than signals based on algorithms.

Meanwhile, the signals generated on the basis of the algorithm are completely independent of individual emotions and feelings, due to their natural state as a trading robot. Yes, signals that are generated based on algorithms are often referred to as algo trading, or trading robots. The biggest risk of this kind of signal is the inability to detect when to stop.

No matter what happens in the market, the robot will continue to follow the initial instructions that have been given. As a result, when a crisis occurs, the robot tends to fail. A number of studies have warned that algo trading cannot detect market crashes.

To avoid fatal losses, users of algorithm-based trading signals need to carry out regular monitoring; checking the smooth running of trading infrastructure such as VPS and trading history, as well as checking the reliability of the trading robots used.

Traders must also be prepared to change the trading robot settings according to changing market conditions. And if the trading robot is no longer profitable, don't hesitate to get rid of it and look for a new replacement. 

Those are the various types of trading signals that are circulating. Then, how to choose the right trading signal? Check out the discussion in the next article about tips and tricks for choosing reliable trading signals.

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