What are Forex Trading Signals?

A trading signal is a specific instruction to buy or sell a security at a given price. For example, a forex trading signal could tell you to buy GBPJPY at 144.00, with a stop loss at 143.50 and a profit target of 145.00.

Most trading signals are placed using stop orders. A stop order is a command to your broker to buy or sell a security when that price is reached. Many trading signals are released several hours before the trading session is to begin, giving the trader time to set up their trades.

These types of trading signals often come in pairs - with a buy and sell price, along with stop and profit targets. The expectation is that one or both of these prices and their profit targets will be hit, resulting in a net profit.

Some trading signals are released in real-time, and the trader will have to be able to place the trades as they happen. There are auto trading services that will place trading signals for you, such as Zulutrade and Rent A Signal. These forex trading signals are often based off of automated trading systems.

Trading signals are derived from technical analysis. Analysts use tools such as pivot points, support and resistance levels, channels, moving averages, and even complex quantitative methods to try and forecast the price. The precise set of tools, methods and rules to determine trades is called a trading system.

Most trading systems (and signals) have an element of discretion to them, in which the analyst uses their experience and abilities to select the best trades. Others are mechanical or even automated, where a trading signal is taken whenever the algorithm says to.

There are many companies and even individuals who offer trading signals online. Most of these require a monthly subscription fee - some are quite substantial. Almost all trading system providers offer a performance record showing their returns. You should examine carefully the performance record of any provider whose signals you intend on purchasing.

But there are free forex trading signals online for those who care to look. Some of these free signals are offered by commercial signal providers and investment firms, in hopes that you'll subscribe to their offerings. Some are high quality, while others are hit and miss.

Ultimately it's up to the user to execute the trades in their account accurately and consistently, to achieve the expected results. For traders who lack the time or the skills to perform their own technical analysis, forex trading signals may be the answer.