Do Forex Signals Work?

Currency traders use signals to guide their buying and selling. Do Forex signals work? First remember that there are three kinds of Forex signals. These are basic fundamental information that affects currencies, technical signals on a trade station program and messages from an alert service suggesting what to buy or sell. First, let’s look at the fundamentals.

The World of the Fed

When the chairman of the US Federal Reserve speaks everyone listens. An announcement that interest rates are going up will invariably send the dollar higher and a drop in oil prices will hurt currencies such as the Canadian dollar or Colombian peso and other oil producers. These signals work and traders should pay attention.

Rice Trading to Technical Analysis

Long ago when there were Samurai in Japan there were rice markets and rice traders. And those rice traders recognized that when the price of rice fluctuated in a certain way that one could predict what would happen next to the price of rice. This was a first instance of technical analysis and is referred to as Japanese Candlesticks based on the symbols that describe daily trades. A purely technical trader then or now relies on charts and trading patterns to guide his trades. In fact today there are people trading Forex with candlesticks.

If Japanese Candlesticks are statistically based why not use any of the many Forex trading programs that are available? An advantage to trading Forex with Candlesticks is that the Candlestick signals are clear and easy to read. There is less chance of a trader missing a signal due to an overly complex system. In addition, Candlestick signals can be superimposed on stock charts of varying complexity and used as attention getters among the vast amounts of data that some programs throw at the trader.

Today there are many statistically based programs that traders use. The advantage of the old candlestick system is that it is visual, easy to learn and simple to use. Do these signals work? They have stood the test of time. The key to using any technical system is to learn it first and stick with trades where the program offers a clear indication of profit. Another caveat is to only apply technical analysis to major Forex pairs that trade in high volume and liquidity. There may be profits in minor currencies but too often the trading volume is so small that technical analysis is inaccurate.

Advice from the Experts

Where do signals from other come into play in trading currencies? If you are trading a given currency and news hits that indicates higher volatility in another currency you may wish to switch. In this case a Forex signal from a paid for service will be of use. Likewise if you are busy trading and have missed a major news release that might affect your current trading pair it might be good to know before you get blindsided in your trades. If you are going to pay for a service make sure that the info that you get helps you trades and does not just subtract from your bottom line. That should be the guide to whether or not signals work.