What Are Forex Signals?

Written by admin on November 24th, 2011

Buying and selling of foreign currency is the essence of the forex market. In doing so, forex traders tend to evaluate the performance of a particular currency and develop their own version of lead and lag indicators, which provides them critical inputs on how a currency is likely to perform.

A forex signal helps to analyze data and ultimately evolve a strategy, which a trader normally uses to buy and sell foreign exchange. This analysis could be based on detailed evaluation of technical data on the performance of a particular foreign currency over a period of time. This also includes a thorough analysis of news events which could provide lead indicators on the way a particular currency would perform.

The traditional or manual way of determining a forex signal is to analyze data which appears on a trader’s trading screen and interpreting the same to derive a buy or sell decision.

Big forex dealers and authorized trading houses have evolved their own automated version of determining a forex signal by developing software based on their experience and analysis of historical data. Since this has evolved based on the agencies’ experience and market trends over several years, many forex dealers are averse to share the same. This automated signal puts the task of trading in the hands of professionals.

Some agencies undertake to trade in foreign currencies based on orders taken from retail clients but within the overall ambit of their secretive forex model and signals. In this system, the individual has to sign up and choose a trader who would manage his accounts. There are many forex firms that provide a diluted version of their software which gives signals on the market prospects for retail clients.

The client has to merely sign up for a fee, get the software installed and set limits on their risk taking capability. The professionals would take care of their investment and ensure that the same is managed well.

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