Subscribe to a few forex newsletters, and you’ll quickly notice that there’s no shortage of advice and opinion on how you should invest your money. It’s a great help to have a resource that tells you what to buy, and when, and cut through the analysis clutter.

Forex signals in practice

When trading currency pairs on the foreign exchange market, forex traders often use real-time, actionable information to help them determine the best time to buy or sell a specific pair. Often referred to as forex signals, these inputs are usually based on technical analysis of price charts or news events. 

Forex signals may be provided by other professional traders or by automated pieces of software referred to as Expert Advisors (EAs). In addition, some services send signals to their subscribers via email, RSS feed or instant message. Notably, forex signals’ time-sensitive nature means they must be acted upon quickly, often within minutes – it’s no good getting them from a weekly newspaper.

Places to source forex signals

There are now hundreds if not thousands of trade signal services for forex traders. From professional traders providing forex signals for a price to online aggregators that provide a bundle of trade signals from various providers for a monthly fee, forex traders are presented with a multitude of options. Here are the main choices to consider:

1. Forex tips from professional traders

Those who are less experienced in online trading will often seek the advice of traders who have “paid their dues” and therefore have a greater knowledge of the financial markets and how they work. Like all forms of mastery, trading is best learned from the masters!

Outside of mentorships, coaching, and online webinars, some professional traders earn some money by providing forex signals that others can use as indicators of when to buy or sell certain currency pairs. 

As with any source of trading tips, these aren’t always 100% correct. Still, getting insight from an old hand who has learned to spot both pitfalls and potential opportunities.

2. Online news services specialising in forex signals

There are various paid services on the internet that traders can also register with to receive frequent trade signals for a range of investment products, including foreign exchange pairs. Websites such as these often aggregate forex signals from a number of providers and systems in order to offer forex traders a more detailed outlook on how the market may be moving. 

When wondering whether or not to place a trade, the breadth of financial, economic, political, and other news covered by these can be invaluable. These types of services often operate on a subscription model, promising a certain number of trade signals over a specified timeframe for a weekly, monthly or yearly fee.

3. Automated trade signals from expert advisor robots (EAs)

Expert advisors, otherwise known as forex robots, are pieces of algorithmic software that are coded to identify specific indicators or situations in the market. When such conditions are reached, EAs provide trade signals that may be “black box” opaque but mathematically sound. 

EAs are installed as part of trading platforms such as MetaTrader 4 (MT4), and can be configured to provide forex traders with notifications about new market opportunities of various kinds. Alternatively, they can be allowed to automatically act on the signals they generate, without manual intervention, opening and closing trades while following a specific rule set. Forex traders can download and customise one of the many free or paid options available online, or even try to code their own EAs.

Problems with forex signal services

Although forex signals can often be a beneficial tool for new traders who are looking for indications as to whether it’s a good time to place trades on certain currency pairs, these types of services also come with their share of problems.

Overreliance on past performance data

Many of the signal services available to forex traders online make heavy use of historical or past performance when generating trade signals for currency pairs. Although analysing historical price action as a guide used to determine future direction is common practice in the industry, what happened last year or over the previous decade doesn’t always give valuable information about the uncertain future. As such, the accuracy of forex signals can sometimes be questionable. If conditions are different from what they used to be and old assumptions no longer apply, traders should avoid planning their investments solely around such indicators.

Cost

A simple Google search reveals a very large number of forex signal services available on a subscription model, and these can vary wildly in price depending on the provider and package selected. Although some trade signals are made available to anybody for free, those that are considered to be most accurate by the online trading community often cost a bundle. 

This can make them uneconomical for new forex traders, who may just be testing the waters or practising using a demo account. Even in live trading, it can be difficult to justify the cost of a signal service that costs a significant fraction of the profits you hope to make each month.

Fraudulent providers

As in any popular yet opaque industry, there are always those looking to take advantage of the unwary and part them from their hard-earned cash. In other cases, forex signal providers don’t set out to scam clients but end up providing advice that is outdated, not rigorously verified, or otherwise unsuitable.

Many traders, both new and experienced, have at some point fallen victim to a fraudulent signal service provider touting “get rich quick” or “over 90% return” systems (often with too! many! exclamation! marks!!!). Although the financial industry as a whole is highly regulated, scams remain a part of the forex trading scene and participants should remain vigilant at all times. If something seems too good to be true, odds are that it is.

*   *   *

Naturally, no advisor can ever be a substitute for your own human judgment. If, for example, your online forex signal service provides you with a “buy” tip that you know is too risky for the strategy you’ve chosen to follow, it’s up to you to resist the temptation.

Forex signals from whatever source are only one of the kinds of information that should be guiding your investment decisions. They may, for example, give you an idea of which currency pairs are worth researching in more detail, or confirm a hunch you already had. The greatest drawback of relying solely on forex signals is that you’ll always be part of a crowd: you’re never the only one seeing those signals, though you’ll rarely be one of the first to act on them.