Many traders
nowadays use forex signal services, especially new traders. Forex
signals are a type of social trading and social trading is not a new
thing at all. In the 70's and 80's before trading went online, many
people followed successful traders they knew personally or via
newsletters, subscriptions, and other forms. They would pay
professionals for trading tips on hot stocks and currencies. But the
progress in technology made trading available to the general public and
many inexperienced people keep joining the large traders’ community.
This led to an increasing demand for trade tips from professional traders and analysts. The former professional traders turned trading tips into an industry,
and now trading is more social than ever. There are many signal providers who operate in different forms and compete with each other to provide the best service and results. We have divided them into five main groups which are “Social media/ forums”, “Metatrader community MQL4/5”, “Social trading platforms/brokers”, “Automated forex signals” and “Signal providing websites”
This led to an increasing demand for trade tips from professional traders and analysts. The former professional traders turned trading tips into an industry,
and now trading is more social than ever. There are many signal providers who operate in different forms and compete with each other to provide the best service and results. We have divided them into five main groups which are “Social media/ forums”, “Metatrader community MQL4/5”, “Social trading platforms/brokers”, “Automated forex signals” and “Signal providing websites”
the social media websites like facebook,twitter and LinkedIn have flourished in the last 7-8 years. many traders have seized this opportunity to open forums and blogs in these websites where they share their analysis and trade ideas. if you type the words “forex signals” in the search box of any of these websites there will be hundreds if not thousands of forums and groups coming up in the results. some of them require a subscription fee and some start out as free, then require the members to upgrade to a gold or silver membership. there are many traders who give signals in these facebook and twitter groups, but without take profit and stop loss targets. in order to get the targets you have to follow the link of the signal, which takes you into their webpage where you´ll be asked to register and pay a fee. some of these groups offer signals free of charge, but the quality and the results are not really good. yes, there may be one or two groups who provide good forex signals for free, but they don´t remain free for long.
MQL4/5
In
2011 "MetaQuotes" Software Corporation, which developed the MetaTrader 4
and MetaTrader 5 trading platforms and their mobile versions, offers
the option of following other traders, apart from trading based on your
own analysis. In 2011
they implemented the trade signals to their platforms. If you look at
the bottom of your MetaTrader platform you´ll see a “Signals” section.
After clicking on it you´ll
see many signal providers and their performance charts. When you click
on one of them you´ll be directed to the MTQL4/5 community where the
performance history and trades are displayed in real time. Most of these
signals are available on a subscription fee, but there are a few free
ones. This is a good option for some extra income for the successful
traders who do not have big accounts.
Social trading platforms/brokers
Brokers have seen the increasing demand for trading signals of financial instruments, in our case forex, and many have started to catch up with the signals industry. They built social trading platforms where traders can see other traders’ history and statistics and follow the most successful ones, which are called leading traders. You can build a portfolio of traders and follow them either manually or automatically. One of the most famous brokers in this category is eToro, but there are many others like TradeCrowd, Tradeo etc. This kind of service is similar to the MQL4/5 signals, the difference is that here you can follow traders for free while on the MQL4/5 network you have to pay a registration fee to the signal providers.
Automated Forex signals
During the last 10 years, forex traders and mathematicians have paired with developers to come up with many software packages that are programmed to execute trades automatically, which are called expert advisors (EA), algorithmic trading software or trading robots. If you have a look around the net you´ll find thousands of people who sell these software packages and claim to have the Holy Grail. While some of them are successful and genuine, many others are totally useless. Since the trading robots are based only on technical indicators, the trades/signals they provide are mainly short-term, lasting from a few seconds to 10-15 minutes. This is called high-frequency trading.
These sort of signals have the advantage of removing the human psychological element and are unaffected by fear or greed. But at the same time that is their main disadvantage. The financial markets are driven by humans and the market sentiment. That is one of the main indicators if you know how to read it. All the indicators that an automated system is based on might point to a certain direction, but if the market sentiment is in the opposite direction the signals are destined to fail. Apart from that, the EAs don´t take into account the economic news and other events which have a great impact on the financial markets, that´s why I´m not a big fan of automated trading.
Automated Forex signals
Last but not least- are the websites that specialize in trading signals, like Fxmarketleaders.com.
Some of these websites are free, but most of them require a subscription fee which varies from 40$-50$ up to 500$ per month. The signals are published on the signals section of the websites and they are sent to the clients emails instantly. The biggest advantage of these signal providing websites is that they employ experienced and professional traders. Apart from that, here you have a team of analysts working together and consulting their analysis with each other, unlike the other signal services where the signals are provided by only one trader and you don´t even know how experienced that trader is.
In this article, we had a brief coverage of how the trading signals industry has evolved. It includes all the financial markets and instruments that are available now, and it´s still expanding to meet the increasing demand. There are several sectors of this industry which we explained shortly.
We will get more in depth on each sector on the upcoming articles.