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How to use forex signals

Forex signals are recommendations that tell you what currency pairs to buy and sell. This guide compares some of the top providers around and teaches you how to use forex signals.

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Updated: Aug 29, 2024

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This beginner friendly Forex learn page explains what forex signals are and how to use them. We compare the best providers available and explore the features to look out for before you join one.

What is a forex signal

It’s a tip or recommendation advising you what currency pairs to trade. However, signals will usually contain more information than just what to trade. Direction, entry price, stop loss, and take profit are often also included in a forex signal.

Trading signals are provided from three different sources which we’ll explain in more detail below.

Professional traders. These types of signals are offered by experienced or knowledgeable traders. They mainly form part of a paid subscription, although some services offer free trials. A professional trader will analyse the currency market before planning a trade, which is then sent to a list of subscribers.
Automated software. There are lots of algorithms that can be bought or developed to provide trading signals. On MT4, these are referred to as expert advisors (EAs). The EA will use a set of parameters which can be chosen by the user. Once the market falls inline with the set requirements, a trading signal is sent. Forex trading EAs also have the ability to automatically place all parts of a trade for the user.
Self generated. Similar to automated software signals above, traders can manually generate a forex signal. These types of signals will depend on the type of analysis the trader uses and are usually the result of certain criteria being met. For example, a trader may be waiting for a support level bounce. Once the price touches the support level, a buy signal will be made.

All types of forex signals are beneficial to traders and it is useful to use all three. Using the services of a professional trader is helpful to someone with less experience as they can make profits while they learn. These types of signals are also a great learning tool, as it’s sometimes possible to notice patterns which can be implemented in your own trading.

Automated software can free up a lot of time and users of these algorithms can focus on other aspects of trading. Algorithms have the added benefit of easier backtesting as they can be programmed to check historical results very quickly, giving more confidence to the user. Their simplicity means they can be used by all types of traders.

Self generated signals are based on a specific system or strategy and are the result of a number of factors falling into place. These types of signals can help with discipline, patience, and following a plan. They’re best suited to someone with moderate trading experience as they depend on a trader’s ability to read the market.

How to use forex signals

Using forex signals is a simple process and below you’ll find a step-by-step guide with the information you need to start benefiting from them.

Register with a broker. If you want to trade forex you’ll first need to find a trusted forex broker where you can place your trades. It’s important to compare the best platforms, taking into account reliability, fees, and ease of use before making your decision.
Find a signal service. Researching guides (like this one) and reading reviews is a good way to understand the different forex signal services available. There are lots of signal providers out there so it’s a good idea to look at recommendations.
Join a signal service. Once you’ve found what you’re looking for, the next step is to register with the service provider. Most forex signal services charge a monthly fee, however some are free or discounted if you register with a specific broker.
Start receiving signals. Usually once you’ve joined a service you will receive signals via email, SMS, or via apps like Telegram or Whatsapp.
Use signals to place trades. When you’re sent a signal you’ll then have to place a trade. Most services give clear instructions alongside the signal.

How do forex signals work?

All three types of signals work differently, although all have the same goal; that is to provide the user with a tip or recommendation. Below we’ll go through each type explaining how they work.

Professional trader.

A professional trader will analyse the forex market before making a decision on what to trade. Once a potential trade has been identified, it will be sent to all subscribers of the service. It’s the users decision whether to trade the signal and also how much to risk. Below is an example of what a forex signal may look like when it is sent to you:

GBP/USD Buy 1.3500 SL 1.3400 TP 1.3700

The signal will include five parts which are fairly self-explanatory. It will have the following:

Currency pair
Trade direction
Entry price
Stop Loss
Take profit

A stop loss is a price level used to protect capital should a trade go against you. Similar to a safety net, it automatically closes a trade for a loss when the direction is wrong. Stop losses are recommended for every trade. Take profit is a price level that when reached, will automatically close a trade. Take profits are target levels for trades.

Automated software

Algorithms are programmed to send signals and place trades when certain criteria are met. They’re commonly associated with a high number of trades aiming to make a small profit each time. Signals generated using this method initially require a little more user input, although when all parameters have been set, trades can be placed directly by the software.

When using automated signals you’ll be sent instructions on how to use the software and the best settings to use. Unlike using the services of a professional trader, these types of signals usually require a one off fee and not a monthly subscription. They are slightly more risky, especially if trades are placed automatically as you have less control over your account.

Self generated

Once a trader has gained experience they may wish to develop a manual strategy to provide signals. Signals of this nature can be varied and dependent on the user’s knowledge and trading ability. Self generated signals work when a trader has a set of rules in place of what they expect to see from a currency pair. Learning to read forex charts is a good way to produce your own signals. Once the rules are established, it is a case of waiting for the signal to be generated.

Compare the best brokers to use with forex signals

If you want to use forex signals you’ll first need to register with a broker. Below we’ve selected the best online platforms for forex trading. Offering low fees, easy to use services, and a range of currency pairs, these are some of the top brokers around.

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How to choose forex signal provider

There is a lot to consider before choosing a forex signal provider and as there are so many around, it can be a difficult decision to make. Below we’ve highlighted some of the key factors to take into account before joining a service.

Results and performance

A proven history of success is the first thing to look out for when choosing a forex signal service. A reputable provider will have no issue in sharing their results with you and the best ones often show their closed signals on their websites. There are even third-party independent sites which can be used to verify results and performance.

Time signals are sent

The forex market is open 24 hours a day except for weekends so finding a provider that sends signals while you’re awake is recommended. If you receive forex signals late at night the opportunity to execute them may have passed by the time you’re awake.

Frequency of signals

Depending on your circumstances, you may prefer multiple signals a day or a few every week. If you are at work during the day time, but receiving lots of trade recommendations at the same time, you may find it difficult to place your orders and miss out. Look for a signal service that sends an amount of trades you can comfortably manage.

Currency pairs used

Some signal services may only focus on the major or minor forex pairs, while others could also include exotics. You’ll need to check on your trading platform what currency pairs are available for you to trade as brokers offer different markets. Choosing a top broker with a range of markets will make it easier for you to use forex signals.

How much they charge

You’ll need to find a signal service that you can comfortably afford to use. The range of charges between providers can be vast. Some charge monthly fees while others require annual payments. The fees you pay are important as they will eat into your profits in the long run.

Are forex signals safe to use?

They can be, but will require a good amount of research prior to using them. If you do go ahead and use a paid service, it’s a good idea to not put all your eggs in one basket. You could allocate a small amount of money to trading forex signals until your confidence and knowledge improves.

Should I use signals to trade forex?

That’s up to you to decide. Learning how to trade forex is a long and difficult process so using signals early on makes sense. While you’re learning how to trade for yourself, you could benefit from winning forex signals. Equally, for an experienced trader, using a service may free up more time to analyse different currency pairs.

Still undecided?

Pros

A professional trader or automated system recommends trades giving you more free time to learn about the forex market
They can give experienced traders a different perspective and add to profits
Forex signals are simple to use and require little technical knowledge
They’re often a cost effective way to gain exposure to the currency markets

Cons

Without using a signal service for a period of time it can be difficult to know whether it is good or not
Some providers claim results that are simply not true

Should I start using forex signals now?

It could be a good idea to start using signals now, but before you do make sure you conduct proper research into the provider. Earlier in this page we’ve given a few recommendations so you could start there. You’ll also need to sign up to a trusted forex broker before using a signal service.

Where can I learn more about forex trading?

Right here on Invezz. Use our education section to learn more about forex trading, the different types of currency pairs, and how to read a forex chart. We also have a news section containing up to date information relating to the currency markets.

How do I know if a signal provider is trustworthy?

There’s a few things you can do before joining a provider to judge their trustworthiness. First, read guides like this page and look at customer testimonials online. The next thing you can do is analyse their past performance. A signal service provider who links their history to a third-party verification program is a great place to start.

Can I get free signals?

Yes it’s possible. Lots of signal services offer free trials and they are a great way to judge the quality of their service without spending any money. Alternatively, sometimes it’s possible to get free tips by joining a recommended broker.

What type of signals work best?

There’s no one size fits all unfortunately, although different signal types will be beneficial in different circumstances. Using professional trader signals is helpful to new traders. Automated signals are a good way to free up time, while self generated signals work well for advanced traders.

A quick recap of what we’ve learned

There are many different types of forex signals and they can be an excellent addition to a trading strategy, or used as a way to profit from the forex market while learning to trade.

Often, novice traders will use a signal service from a professional trader as their first port of call. Adding automated software is a good way to save time and self generating signals require trading knowledge. Learning how to successfully trade can be a difficult task, that’s why we have a host of courses for you to study. Click through to the links below to be taken to our learn hub.

Investing and trading courses

More forex trading basics

How to trade a forex sell signal 2024

Sources & references

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Risk disclaimer

Prash Raval

Financial Writer

Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.