How to read trading signals?
A trade signal is a trigger for action, either to buy or sell a security or other asset, generated by analysis. That analysis can be human generated using technical indicators, or it can be generated using mathematical algorithms based on market action, possibly in combination with other market factors such as economic indicators.
Trade signals can use a variety of inputs from several disciplines. Typically, technical analysis is a major component, but fundamental analysis, quantitative analysis, and economics can also be inputs. They can include sentiment measures and even signals from other trade signal systems. The goal is to give investors and traders a mechanical method, devoid of emotion, to buy or sell a security or other asset.
There is no limit to how complex a trade signal can be. However, traders tend to keep things simple by using only a handful of inputs. For practical purposes, it is far easier to manage a simple signal generator and periodically test it to see what components need adjusting or replacing. Too many inputs would introduce complexity requiring more time than a trader has to offer.
Reading a Forex Signal
Moving forward, before traders take the jump and start using forex signals and forex-signals trading services, it would be great to have a grasp on a realistic signal to get a further understanding of what it all means.
While signals may take on different text and graphical forms, the content from most providers should generally be issued to you along the same lines. For example, you may see “Sell USD/CHF at CMP 0.9309 – SL 0.9334 – TP 0.9278”. Breaking down this signal, you’ll find that the call to action within the signal is to “Sell”, with the pair in question being “USD/CHF”. The “CMP” is listed at 0.9309, with the dictated “Stop Loss” being 0.9334 and a “Take Profit” level of 0.9278.
As you can see, in spite of the abbreviation, and number-heavy nature of any signal you receive, actually understanding what it means isn’t all that complicated.