Signals and bots

How to Read Forex Trading Signals

When you trade currencies with the help of trading signals, you need to know how to interpret them lest you misunderstand your signal provider’s advice and lose money as a result. Although many suggestions given by your Forex signal provider is straightforward, some of them require explanations. In what follows, we will interpret some trading signals for you and will explain how to read them. We will also give you several tips on what you need to do before using Forex signal services.
The most common Forex signals are “Action,” “Stop Loss,” “Take Profit,” and “Current Market Price.” These signals mean the following:
• Action – This is probably the most straightforward signal, inviting you to take actions. Most frequently, you will be called either to Buy or Sell your currency or any other asset.
• Stop Loss – This signal marks an exit point for you. Designed to protect your funds, it encourages you to cut your losses and stop trading immediately. If you use the automated software to send you signals, expect to be pulled out of a trade even without your consent. But whether it is generated manually or automatically, this signal wants you to quit trading before your losses magnify.
• Take Profit – This signal wants you to do exactly the opposite from what the previous signal advises you to do. It invites you to reap a handsome profit. You will receive this signal when a profit level hits a set rate.
• Current Market Price – This signal is different from the signals explained above. Whereas the three first signs represent a call to action, this sign brings a notification of information. A CMP signal wants you to compare the price of your chosen currency pair at the time when signal is issued with the actual price at the time when you are submitting the order.
Knowing what these signals require you to do, you can easily interpret a Forex trading signal and unerringly act upon it. Suppose you receive the following signal: “Sell EUR/USD at CMP 1.1426 – SL 1.1450 – TP 1.1400. You can read this signal as a suggestion to sell the currency pair EUR/USD at the current market price of 1.1426. The signal also encourages you to “Stop Loss” at 1.1450 and “Take Profit” level of 1.1400. Even though the message from your signal provider comes abbreviated, you can now unproblematically understand what actions it wants you to take.
But do not get carried away with the idea that knowing how to read trading signals is sufficient to excel in Forex trading. There are some caveats of which you need to be aware as a new trader using Forex trading signals. Before you choose a signal service, remember to do the following:
• Understand that not all Forex signal providers are created equal. Signal providers considerably differ in quality. The highest success rate for them is just above 60 percent. When you start searching for a signal provider, you will see that many services rank much lower. You should choose a provider for yourself carefully, therefore. Signing up with the wrong service will cost you dearly once you start trading.
• Evaluate your risk tolerance. Forex market is highly volatile and, hence, risky. As popular currency pairs fluctuate widely, it is possible to lose large amounts of money in an instant. Before you fulfill the command of your signal provider, think whether you are prepared to suffer possible losses.
• Understand the market conditions. Signals that you receive from your provider do not necessarily see the bigger picture of the market, in all its entirety. Automated signals can be especially myopic. It is crucial, therefore, to study the current market conditions and quit trading, when you see, for example, that assets act unpredictably.
There are other caveats of which you should be mindful. But even if you pay attention at least to these warnings, you will pave the way for your profitable trading.


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