All Share (J203) = 89 062
Rand / Dollar = 18.41
Rand / Pound = 23.23
Rand / Euro = 19.24
Gold (usd/oz) = 2 929.32
Platinum (usd/oz) = 987.70
Brent (usd/barrel) = 76
Trade +10,000 CFDs with Tight Raw Spreads. – Trade Now!

15 Must Know Forex Trading Signals for Beginners

Must Know Forex trading Signals

 

According to research in South Africa, understanding and knowing forex trading signals when a beginner trader can be a very difficult process.

In this article we will be listing the forex trading signals when traders trade StocksIndicesBinary OptionsCDFsETFsForex and cryptocurrencies like Bitcoin and Ethereum.

This list is not meant to be a ranking but rather a comprehensive list of easy explanations of the must know forex trading signals for beginner traders.

Good luck and good trading.

 

Triangles

 

Triangle patterns appear frequently in the Forex market and will give you insight into future price movements and possible resumption of the existing trend.

The triangle is basically a consolidation pattern that happens mid-trend and usually signals a continuation of the existing trend.

The triangle chart pattern is formed by drawing two converging trendlines as the price temporarily moves sideways.

Traders often look for a subsequent breakout, in the direction of the preceding trend, as a signal to enter a trade.

 

Rectangles

 

A rectangle is relatively simple to comprehend. It forms when the market stands between horizontal bounds known as support and resistance. The market stands between them for some time – almost like a holding pattern when a plane is waiting for a signal from the tower to land.

Usually the price moves between support (on the lower part of the rectangle) and resistance (the upper part of the rectangle) touching both.

Four times is the minimum number of points required for the rectangle, with two points touching the upper resistance line and two points touching the lower support line.

The price then continues its move in one or the other direction.

 

Head-and-Shoulders

 

Head and shoulders patterns are a little more difficult to spot for the beginner trader but become relevant when the neckline is penetrated.

When the neckline is broken as shown in the graph, you would need to make a decision: do you open a short position on the opposite side of the head and shoulders indicator?

Some Forex traders will enter immediately based on their experience, while others prefer to enter on a pullback and retest of the neckline, which is a much safer option.

 

Trendlines – a technical pattern breakout or break down

 

Trendlines are a very simple tool to use, are easy to understand and can be used in combination with any other trading signals.

Basically, a trendline is a line connecting two or more lows or two or more highs, with the lines projected out into the future.

Traders look at these extended lines and will trade on prices that are reacting around them.

 

Bollinger Bands

 

Bollinger Bands are extremely popular with technical analysts and traders in Forex.

As a trader you are constantly looking for incremental moves which you can profit from, so it is important to spot volatility and trend changes in currencies as quickly as possible.

With Bollinger bands there are two bands which wrap around the price action at both the upper and lower extremes. So, when the volatility of a currency pair is high the distance between the bands increases and when it is low, the bands compress.

Always look at Bollinger bands alongside other key data before making trading decisions, because you want to be sure of your next move to avoid any massive losses.

 

 

Fibonacci Levels

 

Fibonacci levels are used by Forex traders to pinpoint where to place orders for market entry, taking profits and stop-loss orders.

Fibonacci levels are basically technical predictors or an indication of where a price may be in the future.

The Fibonacci theory can be explained like this: when a price goes in a new direction, it will return or retrace part way back to a previous level, before heading back in the direction it was going.

That is why this tool works best when the market is trending. The idea is to buy on a retracement at a Fibonacci support level when the market is trending up, and to sell on a retracement at a Fibonacci resistance level when the market is trending down.

 

 

Support and Resistance levels

 

Support and resistance levels will help you identify possible points where a price may change directions. It is not an exact science, so it is more an indicator to use alongside other signals.

Basically, when prices that are falling stop, change direction and begin to rise – that is known as support. It is called support due to it being like a floor supporting or holding the prices.

Resistance is the opposite and is like a ceiling, where you see rising prices stop, change direction and begin to fall.

The indicator will show a price break support or resistance point where a price could possibly change directions.

 

Moving average cross

 

Most Forex traders will watch anywhere from 10, 20, 50, 100 and 200-day moving averages. When trading activity crosses above or below the average or two averages cross each other, a signal will be sent to you.

Typically, you will use smaller and faster moving averages as entry triggers, and longer/bigger ones as clear indications of a trend.

 

Volume surge indicators

 

There are many types of volume surge indicators such as the Chaikin Money Flow indicator, Volume RSI, Volume price trend indicator, Money flow index and so on.

Unusually high volume often comes before a new move in the market, so this indicator is very compelling.  They will help you measure the strength of a trend and allow you to spot reversals as early as possible.

In addition, Volume surge indicators will confirm a breakout and help you identify strong areas of support/resistance so you can find good entry and exit levels for your trades.

 

Read 17 Ways to Manage Forex Trading Risks here

 

Interest rates

 

Interest rates are a very important indicator when trading Forex. That is because an increase in interest rates generally forces a currency to appreciate, since there is a cut in supply.

On the other side, when interest rates drop, the rate for borrowing increases and the currency depreciates.

 

Volatility

 

There are many ways to measure volatility, and as with other indicators, extreme highs or lows in volatility can trigger market changes.

 

Cycles

 

Markets of all types tend to ebb and flow over time, even if they are in a steady trend or in a non-trending condition. One of the more widely known cycles is the seasonal cycle for stocks—sell in May and go away—which could help determine if a strategy is operating in the strong or weak half of the year.

 

Sentiment extremes

 

Used as a contrarian indicator, excessive bullishness according to surveys or actual trading activity can suggest market tops. Conversely, excessive bearishness can lead to market bottoms.

 

Valuation

 

An excessively high valuation compared to market, sector, or stock specific measures can lead to sell signals.

 

Copy Trading Signals

 

Copy trading is following the trades that other successful traders make.

Basically, an experienced trader can become a signal provider and they make a % of your trade profits when you copy their trade.

Copying can happen automatically, or your signal service provider will notify you and then you can decide if you want to execute the trade.

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What, exactly, are Forex signals?

 

Forex signals are communications that you would receive which details, in relation to currency pairs, the optimum entry and exit points.

It works by having a computer (or a person) doing real-time monitoring on the markets in order to identify tradable setups.

The instant that a tradable setup is identified, the computer (or person) sends a communication to the subscribers of the relevant broadcast channel.

The premise prescribes a manner of making seemingly endless and unmanageable market data palatable to traders who aren’t able to watch the screens 24 hours a day.

Communications normally get sent on the channels that the broker makes available to you and could be an email, message, RSS feed or even a twitter update.

 

Why do people provide Forex signals?

 

It’s a bit strange that such a philanthropic effort would be met with such scepticism… truth be told, the motives are not completely philanthropic towards unsuspecting traders like yourself.

As it is in any business model, building a database of clients or even potential clients is critical. Have people that you can connect with and give offers to is a vital component for stimulating business growth. Providing Forex signals is one of the best ways to build a client database.

Some brokers offer free signals and others offer premium signals and may require signup information in order to have your details on file.

I guess, in the eyes of the broker, it seems like a fair trade.

 

What types of Forex signals can I get?

 

There are many reasons as to why providers analyse the movements in the markets. Some do it for long-term setups, some for speculative trading and others are focused on only conducting technical analysis.

Some brokers do it themselves and others implore the use of trading software and complex algorithms to find the proverbial goldilocks zone.

 

It comes down to two types of signals

 

Manual signals

 

These are sent by signal providers who have a person doing the market analysis. There may be advantages to this approach as the analysis is not limited to a rigid algorithm and can be fine-tuned if needed.

 

Automated signals

 

These are identified by advanced algorithms in software packages and are working around the clock. The only drawback is the identification parameters being rigid and cannot be flexible if needed.

 

Could I be scammed or misled?

 

The unfortunate answer is: YES.

As it is in any business, service providers need to be certified and provide certification to prove their competency. You should always be on the lookout for a financial advisor certification from a signal provider.

That being said, you will find that many signal providers have disclaimers stating that their signals should not be considered for investment decisions and are more suited for educational purposes. A red flag should go off if you see statements like that.

There are brokers who offer a premium signal service. The reason for the premium charge is because these brokers have employed market analysts to provide useful signals to subscribers.

Keeping in mind that the objective of signals is to build a client base, you should be mindful that even the scammers signal will be useful for a time, but their data is obsolete once the market conditions change. They will lose subscribers but they also know that there will a fresh wave of beginners always entering the market.

 

Are there any benefits to using trading signals?

 

It’s apparent that increased profits would be the immediate benefit because you would have better information to make decisions.

As in any decision-making process, there are quantitative and qualitative factors that need to be considered and there are a few important qualitative benefits to using trading signals.

 

Diversifying risk

 

If you are a trader who is already engaged in other markets like commodities or equities, then it will be beneficial to have extra information about the currency market because there are many elements of the markets that are correlated.

 

Education

 

Every stream of information becomes critical when you’re still on the steep incline of any learning curve.

Having a constant feed of commentary and market insight is sure to bring you up to speed much quicker than you would without it

 

Time Saving

 

The world of Forex trading requires immense discipline and diligent education in order to become proficient in it.

Not everyone has the time or diligence to focus on market analysis as they should.

Naturally, it would make sense to subscribe to quality data streams that are doing that work for you

 

How is it possible for there to be free trade signals?

 

Free trade signals mostly attract beginner traders because of the “free” buzzword.

What actually takes place most of the time is users are asked to create an account at a particular broker and in so doing the signal provider receives a referral bonus.

It is just utilizing the monetized referral systems that exist in the market. Its important to keep in mind the free does not necessarily mean bad.

You should correlate the signals with other sources and test its validity with your own studies and research.

Which channels can I use to receive Trading Signals?

 

Signal providers will differ on the available distribution channels. You will also need to identify the channel that will be the most beneficial to you in terms of accessibility and content detail.

The most common trading signal channels available are:

  • Telegram
  • Email
  • Text
  • WhatsApp/Viber

 

What should I be looking for in a Signal Provider?

 

Given that the information received from signal providers could ultimately affect your trading performance, it is critical that you thoroughly screen them to make sure that the information that they are providing is reliable.

Here are some factors that you can consider:

 

Track record

 

The providers track record should speak for themselves.

The Forex community has many reputable review platforms that provide transparent data detailing their trading experiences with various brokers.

If you come across any providers that aren’t transparent about their trading results or track record, rather take a step back and weigh up a few more options.

 

Trial period

 

Trial periods are always a good idea for you and the provider.

Providers who offer trial periods give confidence that they have nothing to hide and show that they are confident that customers would be willing to sign up after seeing the services that are offered.

 

Customer support

 

In a world that is completely digital to the point where human interaction is hardly necessary in many things, this is an area that is critical.

Most providers have completely digital sign ups and you hardly ever interact with a physical person until the point where something goes wrong.

There’s nothing worse than seeing your subscription charge going off monthly but your service is not working.

That’s why it’s important to do the research on the customer support service so that you have a clear picture of what you’re on for once you subscribe.

 

How does the trading signal get calculated?

 

As already mentioned, the signals are basically triggering for you to take an action to buy or sell based on a set of criteria that has been setup by the signal provider.

These criteria range from the simple to the more complex, and it is worth understanding the types of signals to help you with your Forex trading.

 

Read 20 Best Commodity Traders and Brokers here

 

In conclusion

 

From the plethora of brokers in the market to the software platforms and even all the jargon that one has to come to terms with. It can very quickly feel like it would be easier to jump ship rather than sail on through to calmer waters.

Just like in any discipline, everyone needs that advising voice in their ears to give a timely word to take advantage of a new opportunity. A voice that is seasoned and informed and sees things that we’re not necessarily conscious of.

This is exactly what trading signals can be likened to. Surviving in the Forex world is a task that requires an incredible amount of dedication and diligent research which, unless you’re a full-time trader, seems virtually impossible to achieve.

Thankfully, there are Forex philanthropists who have created distribution channels to provide you with real-time market changes and movements so that you can identify potential opportunities that may fit your trading portfolio.

Having already allocated the resources to study real-time market data, trade signal providers may offer their data to you at a premium or for free.

The onus is still on you to vet the data to ensure that it is accurate, but it seems like a much better option to be standing on the shoulders of the bigger brothers in the market.

In this article, you will find helpful answers to a few pertinent questions regarding trade signal providers and trade signals themselves, according to research in South Africa.

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Rate this post

Written by:

Louis Schoeman

Edited by:

Skerdian Meta

Fact checked by:

Arslan Butt

Updated:

August 29, 2023

Written by:

Louis Schoeman

Featured SA Shares Writer and Forex Analyst.

I am an expert in brokerage safety, adept at spotting scam brokers in mere seconds. My guidance, rooted in my firsthand experience with brokers and an in-depth understanding of the regulatory framework, has safeguarded hundreds of users from fraudulent brokerage activities.

Edited by:

Skerdian Meta

Leading Analyst

Skerdian Meta FXL’s Heading Analyst is a professional Forex trader and market analyst and has been actively engaged in market analysis for the past 10 years. Before becoming our leading analyst, Skerdian served as a trader and market analyst at Saxo Bank’s local branch, Aksioner, the forex division and traded small investor’s funds for two years.

Fact checked by:

Arslan Butt

Commodities & Indices Analyst

Arslan Butt, a financial expert with an MBA in Behavioral Finance, leads commodities and indices analysis. His experience as a senior analyst and market knowledge (including day trading) fuel his insightful work on cryptocurrency and forex markets, published in respected outlets like ForexCrunch.

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