The forex market can be pretty intimidating to a new trader. After all, it is the domain of multi-billion-dollar banks and foreign governments -- how can a small retail trader compete? Well, forex signals are one way to help level the playing field.
Forex signals are alerts that are sent to you, usually via email or SMS text message, when the conditions are ripe for a currency trade. Or, even better, you can sign up for an automated service that will automatically make trades for you when your preferred forex signals are triggered.
Forex signals services rely on forex signals software -- computer programs that constantly monitor the foreign exchange markets for high-probability forex signals. Most forex signals services rely on "technical data" from currency charts to identify conditions that have historically led to profitable trades. Although you don't absolutely need to understand the data behind forex signals, a little basic knowledge can help you get the most out of your forex signals service.
One way to better understand forex signals is to download currency charting software. Although there are many programs that are quite expensive, MetaTrader is a free one that works well for most forex signals applications.
Whatever forex software you use, it must be able to plot currency prices in "candlestick" format. This allows you to easily see the opening, closing, high, and low prices of a currency pair for a given time period -- daily, hourly, or even minutely! Viewing prices this way, you can see patterns that emerge with "support" and "resistance."
Support can be thought of as a "floor"; a price level which the currency seems to hit and then bounce back up. Resistance is like a "ceiling"; the price level at which the currency seems to reach its limit, and then drifts back down. But once a currency pierces through either the support or resistance, it is likely to fall or rise a substantial amount until it finds a new "floor" or "ceiling". Breaking through support or resistance is one of the best forex signals.
If you have a knack for examining charts, or you just like to do it, that's great. But the reality is that in order to profit from high-probability forex trades, you need to react to data more quickly than manual chart analysis will allow. This is why forex signals services are the busy trader's best friend, and automated trading programs are the very-busy trader's better friend! It helps to understand the science behind forex signals, but it isn't vital. What is vital is a quality service that notifies you when it's time to make a trade -- or better yet, makes the trade for you! There are many competing services out there, so be sure to do your homework and check the company's performance data. Reputable service providers will have it linked from their home page.
Now get out there and start making some money!
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