Are Forex Signals Reliable For Trading Decisions?

Forex signals are not reliable as a single method, but they are one of the important decision mechanisms for investors who want to evaluate market conditions and risks due to special situations.

Forex trading signals are trading signals that refer to the currency market, i.e. the market on which euros, US dollars, etc. are exchanged in real time. So you speculate that a certain currency will become stronger or weaker compared to another and then want to take advantage of the corresponding market movement.

Potential investment opportunities are usually determined by the signal provider using chart technology/chart analysis. The most traded Forex pair is the Euro to US Dollar ( EUR/USD ). 

As a beginner, you shouldn’t just blindly copy trading signals. Even if you make a profit, you are forever dependent on someone else. Imagine you earn a lot of money with trading signals, quit your job and then the signal provider stops the trading signals and no longer sends you notifications.

Then you are left empty-handed because you no longer know when to buy CFDs or other financial instruments. You lack the skills to make these decisions about buying or selling.

So your goal should be to learn stock market trading yourself from scratch. Trading signals can then be helpful to be able to look over the shoulders of experienced traders. Of course, this includes the requirement that the provider shares the reasons and setups of his trades with his customers.

If you already have some experience, or perhaps you already trade successfully in the financial markets yourself, you can copy other people’s strategies using trading signals and thus diversify your trading styles. It may be advisable to first use a demo account to track the recommendations.

What Are Forex Signals And How Do They Provide Trade Recommendations?

So if you open a buy / long position on EUR/USD now, you are betting that the euro will strengthen against the US dollar. Conversely, you are betting on US dollar strength if you sell the EUR/USD (sell/short). When it comes to currency pairs, there are so-called majors, minors and exotics.

The categories relate to the volume traded (more on volume trading ) and the liquidity of the market. Here are some examples of the different categories:

Majors

– EUR/USD (Euro vs. US Dollar)

– USD/JPY (US Dollar vs. Japanese Yen)

– USD/CHF (US Dollar vs. Swiss 

Minors

– EUR/GBP (Euro vs. British Pound)

– AUD/CAD (Australian Dollar vs. Canadian Dollar)

– CHF/JPY (Swiss Franc vs. Japanese Yen)

Exotics

– EUR/SGD (Euro vs. Singapore Dollar)

– ZAR/JPY (South African Rand vs. Japanese Yen)

– USD/NOK (US Dollar vs. Norwegian Krone)

Most forex trading signals refer to the majors or minors because they have sufficient liquidity (more on forex trading ). Exotics are only useful for long-term trades because they have very high spreads (difference between buying and selling prices).

How Can Traders Evaluate The Accuracy And Credibility Of Forex Signals?

Unfortunately, many dubious providers of trading signals promise quick money and thus deceive beginners who are new to trading securities. Many normal investors who have previously only invested in stocks or ETFs are fooled by this and hope for high returns if they follow the recommendations. But nothing in life comes for free and especially not on the stock market. 

The trader’s craft must be learned over several months and years. Analyzing the financial markets is not something you learn overnight – there is no shortcut by following recommendations from apparent professionals.

It is not without reason that, according to information from many platforms, 95-99% of all traders lose money in the long term when trading securities. 

There are also no secret indicators that lead to quick money. You only have the opportunity to learn the craft yourself, gain experience, if necessary start with a demo account and in this way get closer to success in the long term. Of course, tips from experienced traders (with a certain level of seriousness) can make this path easier.

What Role Do Technical And Fundamental Analysis Play In Signal Generation?

To put it simply, these are simply recommendations to buy or sell financial instruments. These included, among other things, Forex pairs (currencies), stocks, indices, raw materials or cryptocurrencies. Forex trading in particular has become increasingly popular with trading signals in recent years.

This is mainly because trading brokers offer high affiliate fees for (decentralized) trading of currencies and/or CFDs (a popular trading instrument). We will explain why this could be problematic for you as a possible trading signal recipient in the course of this article. 

Trading signals are sent from different sources. Here we have to differentiate between two different methods of copying. When manually copying trading signals, any trader usually issues his recommendations via a messenger service such as Telegram or WhatsApp and sends the key data of the trades as a notification.

The recipient of the trading signals then copies the parameters of the trading signal (entry, stop loss, take profit) into his own trading platform, which is connected to his account. The big disadvantage here is that the price of the traded asset has already moved much further before you even see the signal and implement it with your assets. Before you have bought the right instrument, some return may have already been “lost”.

Such signal groups are a dime a dozen and are mostly advertised via social media such as Instagram, Reddit or Facebook. Most of the groups are free or involve a monthly subscription fee.

How Do Forex Signals Align With Different Trading Styles And Timeframes?

The automated copying of forex trading signals, on the other hand, is much more complex. Here you have the opportunity to run everything automatically. The recipient of the trading recommendations links his software (e.g. Metatrader 4/5) with software, a so-called Trading EA (Expert Advisor).

This Expert Advisor mostly trades according to set patterns and automatically transfers all sell signals and buy signals into the receiver/copier trading software. Alternatively, there are also brokers, which offer such links directly via broker-internal software.

Here, manual traders can also “access” the copiers’ accounts directly and implement their decisions or trading signals 1:1 with CFDs or other securities. So you buy the same financial instruments with practically no effort.

Are There Signal Services That Offer Real-Time Alerts And Analysis?

There are countless signal providers that offer real-time alerts and analysis charts for you. You should research the market to reach the most suitable one for your forex portfolios. There are some clues that indicate whether a trading signals provider is reputable or not.

Many unregulated brokers pay very high commissions when customers sign up through affiliate links. The trading signal providers then earn money from every transaction that the customers make.

There is a clear conflict of interest – the higher your trading activity, the more the signal provider earns. In addition, unregulated brokers often charge crazy fees through spreads, which puts additional strain on our trading account. So make sure that your provider prefers to charge a fixed monthly fee rather than working with a dubious broker in a non-transparent manner.

But be careful, even a track record or high hit rates is often a false sense of security and there is a risk behind it. Especially with automatic trading systems that are based on indicators or oscillators, there are strategies that produce very good results over a few months before there is a total crash and a total loss of all investors’ assets.

This does not mean that the use of indicators is generally pointless, but these automated systems usually only generate positive returns for a certain period of time. You should especially beware of exponential growth curves in performance. This is often a so-called martingale strategy. 

See you in the next post,

Anil UZUN