Designing a forex signal trading system requires technical analysis of market indicators, statistics or trends. Without a forex system, a trader tends to let his emotions get in the way. Forex signals are used to remove “emotion” from the equation.
A new trader can design their own forex signal trading system after education and practice on a “demo” account. Most trading platform websites offer daily newsletters that they post on their sites or send to the traders email address. These newsletters are usually from a professional trader, broker or market analyst and can be very helpful whether the trader has a forex system or not. The ultimate goal, of course, is to make successful (profitable) trades using all available information.
The type of forex trading signal or strategy a trader uses largely depends on the type of trades they are interested in making. There are short, medium and long term traders and each has advantages and disadvantages.
A short-term or day trader capitalizes on very small changes in rates that they expect to happen each day. The forex system for the short term trader will focus on the study of daily charts, indicators, and even the time of day. A long-term trader needs large amounts of capital to cover daily fluctuations and their forex system will focus on long-term fundamentals. A long term forex trading system will be quite different from a short term forex trading system and the indicators that signal each to make a trade will be quite different.
Most traders fall into the category of mid-term traders. These traders have the lowest risk and generally need less capital than the other types, but their trading opportunities are limited. Forex signal trading for the medium term trader involves all the indicators used by the day trader and the use of additional indicators and studies to find the best entry and exit points. In general, the more indicators used in a forex system, the more reliable the system should be, but the fewer trades will meet the traders’ criteria.
There is a tremendous amount of information available on the web to help new traders design a forex system. There are seminars, professionally written newsletters that include entry and exit signal points, free charts, and much more. There are chat rooms and blogs to get an idea of what current traders are doing and learn about their successes and failures. Reports say that 90-95% of all new traders will lose their initial investment within three to six months of their first trade. To reduce that risk, new traders need to educate themselves, practice, and use forex signal trading to take emotion out of the equation.