When you are only finding your bearings as a trader, you will come across the nomenclature of trading that might initially confuse you. Traders often use such terms as “bear market,” “arbitrage,” “Initial Public Offering (IPO),” and “trade signals,” among many others. Lest you feel overwhelmed by these new notions and make trading mistakes, you need to have a clear definition of each of them.
A trade signal is one of the terms that traders should understand well so that they do not miss an opportunity to earn a profit. As might be clear from its name, the trade signal is a trigger to buy or sell a security or other asset that is generated by analysis. Trade signals may be given by human analysts who study technical indicators in combination with mathematical algorithms and economic indicators. Or trade signals might be generated by robo-advisors whose calculations are made with the help of sophisticated algorithms.
Trade signals use information from several disciplines, relying on technical, fundamental, and quantitative types of analysis. Other inputs they use come from economics. Not infrequently, trade signals include also trade signals from other systems. They use as much information as they can collect, because their goal is to give a trader the most precise method to buy or sell an asset or security.