All trading strategies boil down to knowing when to buy and when to sell. These points in time are known as entrance and exit points, respectively. Yes, it sounds simple buy low and sell high. But its not easy and when trading currency its even tougher than trading stocks, where company statistics can give you a good starting point.
Forex trading is different. Youre trying to predict how the currency market will change in a certain time frame and then take advantage of the gainers by buying them at their lowest points and selling them when theyve peaked. The question is, how does currency behave. What factors influence its gains or losses? And how do we measure those factors?
Professional traders study these very questions every day. They may be sitting in front of their monitors nearly every waking hour in order to pull together facts about how the various currencies are acting in relation to each other. They try to determine a relationship between daily events and forex prices. But most investors dont have this kind of time or dedication. How are they able to make good trades? Simple they buy the information rather than research it themselves.
Forex brokerage houses have come up a solution for the average or more casual investor. They distribute the results of all that professional research, combined and reported in what they call signals, to paying customers. Subscribers learn what factors are present in the market that could mean a change in currency values. This eliminates hours of daily research and allows the more casual investor to have a life outside of trading, yet still get some of the same information the professionals use.
Unfortunately, signals arent complimentary. Your broker probably offers signals for a fee. You need to determine your level of involvement in the forex market and whether or not its worth it to you to subscribe to a service like this. If you havent found your broker yet, this may be a good included service to search out and compare prices for.
Signals bring results.
Those companies that create the signals use technical and statistical analyses, combine them with trend indicators and deliver the results frequently to assure that you get accurate and real time information. The forex market is fast-paced and volatile, so it is up to you to use the signals to set up and execute trades.
Of course, theres no guarantee. Signals are a useful TOOL, no more. They give an indication of how the market is performing and how it may be trending. But they can and will, be wrong. The goal should be to have enough winners to pay for the losers and have profit left over. Never expect to have no losers, because you will. You cant let this discourage you, but instead learn from it. Find the signal you missed or the time limit you failed to recognize. Next time youre in a similar situation, chances are youll do better.
Remember, if forex trading signals were perfect indicators, no one would ever fail in the foreign exchange market. Use the tools, but dont be completely dependent upon them.
Michael Russell Your Independent guide to Forex Trading