As you have browsed the internet in order to learn more about forex trading you have probably come across the term forex trading signals quite a bit and as you read and learned more about what a trading signal is you may have wondered how to use generate them.
trading signals are generated through your technical analysis
of charts. Every successful trader and company employ their own strategies
and trade based on trading signals generated through their developed strategies. It is very important that each trader creates their own strategy in order to trade with success over a long period of time.
Developing the proper strategy requires plenty of time and in most successful cases several years of development, testing and implementation. The development of a viable and profitable forex trading strategy is preceded by several years of proper education and learning.
What is a forex trading signal?
It is a signal generated by your analysis which will tell you if you should go long a currency pair
or short. It can come from chart patterns, technical indicators and price action itself and as always it depends on your interpretation of what you see and how you view it.
One big mistake new traders make is that they act based on one trading signal alone which causes them to trade plenty of false signals
. They rush into a trade and lack patience to have their signal confirmed multiple times by different indicators.
You should never act on one signal alone, take is as a sign to analyze the currency pair more in depth and see if you will receive more signals which confirm your first signal before you step in the market and trade. Patience
as well as discipline
are very important if you want to become a successful forex trader.
How to avoid trading on one signal alone?
- First you need to develop a proper trading strategy which you learn how to trust and you know it generates the results you desire.
- Determine how many signals you feel comfortable with, the number depends on you. You may want to look for between three and five trading signals which all confirm each other. The more you seek, the longer the trend may run but the more secure your signal. You need to find a balance between how many signals are beneficial while you still capture enough pips.
- Make sure the signals come from different sources and not all from the same as it will be the same as trading with one signal only.
- Once you have multiple trade signals, enter your trade with a small lot size and wait for the currency pair to move. Your first entry is often followed by losses and it is advisable to stagger your entries in a support or resistance zone.
Keep in mind that successful traders are patient traders and have a lot of discipline which you need to learn over several years. Successful traders do not let their emotions
guide them when they make trading decisions; they trust and follow their strategy.Are you ready to apply what you have learned?
Once you feel ready to apply your theory into reality you may want to open a Paxforex mini-account
and start to test your knowledge in the real market on a small scale where you can build and perfect your trading strategy before moving over to a standard account