Yes, forex signals can work but there is much more to it than simply following each and every buy or sell signal that a signal provider sends. I do not think anyone should be blindly taking a position in the forex market without having a clear understanding of why there may or may not be an opportunity worth considering. If you were to take every forex signal without doing your own market analysis to try and filter out the bad trades, I would expect the performance to suffer. That’s without even mentioning the importance of forex money management and trading discipline, both which can have a significant impact on the results of any forex signal service.
What are forex signals?
If it wasn’t obvious, forex signals are when someone send you an alert to buy or sell a specific currency pair at a certain price. These signals can include optional stop loss and take profit levels to manage the position. You can receive forex signal notifications via SMS, email and platform pop-ups.
Forex signals can be based on technical analysis, fundamental analysis, price action analysis, or a combination of them all. An honest forex signal service will have years of practice trading online and conduct in-depth market analysis to generate these signals. These will tend to have higher probability but there can still be no guarantees and I would always want to confirm every position before entering the market.
There are some dodgy signal providers that do not have the experience or skills required to analyse the market effectively. This can lead to poor quality signals which give the industry a bad name. Anyone could setup a forex signal service and claim to have the best signals with a high win rate that generate unrealistic amounts every month.
I would be cautious and avoid anyone who claims that you can make “x” amount over “x” period of time. For starters, why would anyone who can trade that well be providing signals and not just focusing on their trading. At the very least, I would want to see a real live verified account that shows how the forex signals have been performing over a sustained period of time.
How do forex signals work?
It is quite a simple process which is probably one of the main reasons that forex signals have become so popular for aspiring traders. They typically work as follows:
- Sign-up to a forex signal provider
- Get buy/sell signals sent to you
- Consider if you would like to take a trade
- Wait and see how the trade plays out
- Rinse and repeat!
Whilst this may sound very easy and tempting for those of you who do not have the time or knowledge required to trade, it is important to understand the significant risks involved. There will be losing trades and past performance is by no means any indication of what will happed moving forward. You should never risk more than you can afford to lose.
I would always test a forex signal service on a demo account to begin with in order to get a feel for how they work and the quality of the signals. Remember, you do not need to take every signal and should only trade in a way that you feel comfortable as every trader is different.
Forex signals vs copy trading
It is easy to get confused between forex signals and copy trading. With forex signals, you are typically sent a buy or sell alert and you then take the trade yourself. When it comes to copy trading, the process is more often than not fully automated.
With copy trading, you can choose the traders that you would like to copy from a particular social trading platform and their trades will automatically be duplicated onto your account without you needing to do anything. You can add or remove trading strategies at any time.
Which forex signals should I use?
The vast amount of forex brokers to choose from nowadays has made access to the markets quick and easy for anyone to trade online. Combine this with the various social media channels, and you have the perfect storm for all sorts of forex signal providers to come out of the woodwork.
There is the Instagram “influencer” who rents a flash car, wears fake designer clothes and claims to be a millionaire via trading. Then there are the experienced traders on social trading platforms such as eToro, where you can see a verified track record and detailed statistics of how their signals have been performing.
You can decide which, if any, signal provider you would consider. I personally feel that you would be much better of taking as much time as possible to read about forex trading and practice your trading strategies on a demo account. This costs nothing and can be a great way to build your confidence and understanding of the forex market.
I think that learning how to trade forex by yourself is priceless compared to relying on someone else whose quality of signals you cannot be sure of. Even if you did find a good forex signal provider, what would happen if they were to disappear? You would be stuck starting from scratch all over again.
Are forex signals worth it?
Yes and no. I say yes because it can be an experience that makes a beginner realise that they cannot rely on anyone but themselves when it comes to trading online. I am sad to see so many traders get burned because they fall into the trap of believing claims made by forex signal providers that are just after their money, without providing anything of real substance. It can be a harsh lesson to learn but spur them onto trading manually by themselves.
Let me put something into perspective for you. You could be getting trade alerts from the best forex signal provider in the world yet still lose money. This is because trading forex depends on much more than simply picking the right entry point into the market. You need to think about money management, discipline, emotions and when to exit.
I have seen the exact same forex strategy give a completely different set of results, simply because the traders were using different stop loss and take profit levels. A trader who cuts their losing trades short and lets their winning trades run, may have a lower win rate but could still outperform a trader with a poor risk to reward ratio where one trade cancels out a consecutive run of winners.
Then you have the human emotions that can come into play. Someone may use forex signals for a week and suffer losses, then turn around and call the signal provider a scammer, writing all sorts of horrible things about them online. However, that may have just been a bad week which is normal with any forex trading system. The trader who did not show fear, anger and greed, may have seen better results in the following weeks.
Conclusion: should I use a forex signal service?
I cannot tell you what to do, but I can say that I think it is better to teach yourself how to trade online as that way you can learn from your mistakes and become a better trader in the long run.
Yes, it does take many years of practice and is very difficult to be a successful forex trader, but you cannot always know who you are copying signals from. They might not be experienced traders themselves. Thus, if you do decide to go down the forex signal route, make sure you do your own due diligence. ForexSignals.com are one of the most well known signal providers in the industry.
Things to look for are the types of trading strategy being used and verified track record. You might want to go through a social trading broker such as ZuluTrade as they should already have vetted the signal providers on their copy trading platform.
Overall, I think that following signals and copying other traders is a path chosen by people who want to see immediate results and make quick money. Needless to say, most of them will fail.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.