Forex Trading Signals' Form And Function
A trading signal performs three essential functions.
The signal identifies a trading opportunity and provides the user a queue for market entry.
The signal outlines a clear plan for exiting the open position, typically through the use of take profit and stop loss orders.
Trading signals automatically align risk to reward by predetermining market entry and exit price points.
In addition to furnishing currency traders with a measured approach to the market, forex signals are user-friendly.
To illustrate their functionality, assume that there is heavy intraday volatility the EUR/USD near the 1.1100 level. At first glance, price action in the EUR/USD appears chaotic, which then makes trading seem risky. However, your third-party signal provider recognises a potential buying opportunity and sends you a real-time recommendation to buy at 1.1106. There's also a suggestion of a take profit at 1.1142 and stop loss at 1.1094. Before the trade's execution, the signal has assigned a concrete risk to reward ratio of 1:3.