It's possible that you've heard the words 'forex signals' on occasions, but you're not exactly sure of their meaning. Or probably you do know but you're simply curious to find out a lot more. However, it helps if we explain what the forex market actually is in order to understand the signals related to it, so let's cover that first:
What is the Forex Market Exactly?
Well, Forex is short for 'Foreign Exchange' but what if the world in which we lived only had the one currency? Imagine that for a second. Yes I know, it's ludicrous but it would likely mean that we operated in one global economy. Moreover, there obviously wouldn't be a market called foreign exchange, because if we were all using the same currency, the requirement for foreign exchange rates and currency trading wouldn't exist.
Thankfully though, the world consists of countries who operate their own currencies (obviously the number has diminished since the advent of the 'Euro') but even so, it follows that individual currencies call for foreign exchange rates and the market that trades them. It is this market that converts one currency into another, with fluctuating rates for buying or selling. Stock market traders make their living and in some cases, fortunes, by trading on these constant fluctuations.
The foreign exchange has existed for quite a while now but there have been plenty of changes along the way. Most notably, technology and specifically the Internet, plays a crucial role in the where the actual trading of currencies is concerned, giving traders more scope to trade with better accuracy and follow specific signals when appropriate. Which leads us into.....
What is a Forex Signal?
Basically, these are alerts traders take advantage of in order to take specific actions. They give the trader vital information on when to strategically enter, exit, or freeze a trade.
These signals can be received in a variety of ways. As I said above, technology helps massively and a trader may receive alerts via the following methods:
An audio alert from their PC (useful if you've got better things to do than sit staring at your computer all day).Pop-up messages (If staring at your computer is something you can't avoid because it's part of your job or you suffer from OCD)Text messagesEmails
The last two are handy for traders who are on the road a lot and can receive alerts through their mobile device
Different Forex Signals
In addition to those common buy and sell signals, traders can receive other alerts which are slightly more intricate by nature, these are:
OB/OS - Overbought/Oversold - Part of the RSI (Relative Strength Index) which indicates when a currency pair has reached a specific threshold, readings above 80 commonly indicate OB and readings below 20 indicate OS.Volatility - What the likelihood is of a currency rising or falling and by how much, so the trader can discern risk factors.SL/TP - Stop Loss/Take Profit - Hopefully this is self-explanatory but for the purpose of being thorough, this gives you indicators on when it's best to quit while you're losing/winning.Partial Buy/Sell - which tells you to only buy or sell part of the currency, to minimize risk.
Hopefully you now have a greater understanding of what the foreign exchange or forex market entails but remember to use the signals available to you wisely, or what you're essentially doing is gambling with your money and that is definitely a risky game to play.
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