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Forex signals are among the most important factors of forex trading and certainly a crucial tool for any aspiring forex trader. Forex signals come from forex signals providers, but their popularity and high demand have led to market saturation. Simply put, there are so many forex signal providers out there that it has become almost impossible for beginner traders to choose one or more that are the best for them. Today, we are going to address that issue and list all the factors you need to consider when choosing the best forex signal provider in 2022.
What are Forex Signals?
Types of Forex Signal Providers
Forex Signal Providers’ Reputation
Performance of Forex Signal Providers
Quantity Vs. Quality of Signals
Before we get to how to choose the best forex signals provider, we need to clear a few misunderstandings about what forex signals actually are. Essentially, forex signals are tips about potentially profitable forex trade. Their job is to alert you that there is some money to be made on trade in your specified field. At the very least, a forex signal should contain information about the currency pair, entry price, and take profit price. If your provider includes a stop loss price, that is a very welcomed bonus, but a bonus nonetheless, as any trader should be able to determine this for themselves.
Above all, a forex signal should be delivered in a timely – and we can’t overemphasize this – manner. Once you receive a forex signal, even coming from the best providers on the market, you will only have minutes to execute the trade. The forex market is constantly shifting and just a few points up or down can mean the difference between a profit and a loss. You don’t have much time to do your own research and you must trust a forex signal provider’s intel on the topic. That is why the process of selecting the best forex signal provider is so important and must be taken seriously. Let’s see how one goes about it.
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In broadest terms, forex signal providers come in two flavors: technical analysts and fundamental analysts. These two categories reflect their approach to generating quality FX signals.
Technical analysts base their signals on things like candlestick patterns, market structure, price channels, support and resistance levels, and similar. They usually have patented algorithms that collect these data points and come up with a credible FX signal. Of course, some are more successful than others and the best ones will have honed their methodology over years, if not decades, of operating under real market conditions. Their track record is well-proven and they rarely miss their mark.
Fundamental analysts, on the other hand, have a more traditional approach. They analyze central banks’ policies, major players’ actions, global news, job reports, market conditions, and other factors. Over time, they create a picture of what the future holds for the forex market. To perform a successful fundamental analysis takes a huge amount of knowledge and years of experience and even then, mistakes can happen.
Shortly put, technical analysts try to recognize trends that are already in motion. By using a lot of processing power, it can generate forex signals that are more accurate, but with a very short expiration date. Fundamental analysts base their signals on things that create trends, trying to anticipate them. The process is not as precise, but you will have more time to react to signals and take advantage of them.
In this business, reputation is everything. Unfortunately, in a world filled with paid media and fake news, reputation can be hard to determine. However, there are too many forex scams to not to at least try and dig around a bit. To determine whether a forex signals provider is reputable and trustworthy, you will need to perform several steps.
First, google them and see what comes out. This may sound a tad naïve, but you would be surprised what a Google search can reveal, especially if you add ”scandal” after the company’s name. In this case, no news is the good news and the best possible outcome of your search.
The next step takes a bit longer and requires that you follow the provider on social media and even subscribe to their email newsletter. Occasionally, they will give out free signals you can use to test their service. Based on them you can judge what their full service is like.
Finally, you can go for a free trial. Most forex signal providers will provide one and it is an excellent chance to assess their product before buying it. We would recommend taking full advantage of that offer. You can usually get a week or two, which is enough to fully test drive the service and see whether it is worth paying for.
Probably the aspect people care about the most when choosing the best forex signals provider is the performance. After all, if most of their signals are busts, there is not much point in wasting time with them. Reliable providers will have a relatively high degree of win rate, but the trouble is that just how high is enough varies from person to person. If you are looking for flawless forex signals with a 100%-win rate, we have some bad news for you. Such a provider does not and will probably never exist. It is simply impossible to be right all the time in this business. Beginners often tend to make this mistake and only end up disappointed and frustrated when not every FC signal pans out.
If, on the other hand, you want enduring reliability and you are prepared to take some losses to ensure profitability over a longer term, then you will be able to find a provider that fits the bill. Every signal provider worth its salt will publish performance data on its site, so you can check them out. Just keep in mind that the old adage of historical returns not being indicative of future gains applies here as well. Regardless, it is the only metric we have to judge the performance of a provider, so we must use it.
Is it better to have a provider that sends out plenty of low-value signals or the one that generates only a few, but with high returns? The answer to this question mostly boils down to personal preferences, as both approaches are valid. Perhaps the best solution is in the middle of the road on this debate, but that is for you to decide.
The quantity approach will bury your inbox under an avalanche of forex signals, but profits on each one will be minimal. You will need to perform a myriad of trades to earn decent returns, and each transaction costs, which can quickly add up. The upside is that even if some don’t work out, you will still have plenty of others to fall back on.
The quality approach will get you one or two FX signals per day or week, but the potential payout will be significant. The trouble is that if they are busts, your profit margin will take a hit.
Selecting a forex signal provider is not a decision to be taken lightly. Approach it with due diligence and consider all the aspects we have listed above. That way, you can be sure you have made the right call.
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