Using good Forex trading signals can greatly increase your profits, while poor Forex signals can cause you to lose your money. How can you tell which Forex signals are worthless, and which are worth their weight in gold? We’ve tested some of the most popular signals on the market to determine which are relevant and reliable, and which should be avoided. Check out our Forex trading signals listing and reviews below to better understand which signals are right for you.
Introduction to Forex Signals
In your journey into Forex trading, you will come across a type of service offered to traders called “Forex signals.” This appears to do the hard work for you: Forex signals tell you what Forex pair to trade and how to trade it. On the surface, this seems like a great idea. Why not just follow someone else’s instructions rather than spend months or years learning how to do this for yourself? What’s there to lose?
Well, just like so much else in the world of Forex trading, there are lots of different types of Forex signal providers of varying qualities and features, and you must assess if they meet their claims and whether they fit your needs.
Let’s begin by asking the question, “What are Forex signals?”.
What are Forex Signals?
A Forex signal is a set of instructions to trade a Forex pair in a given direction. For example, a Forex signal could be as simple as, “Go long EUR/USD.”
That example of a Forex signal contains two pieces of information: the Forex currency pair or cross to trade, and the direction to trade it.
If that signal arrived on your device, would you automatically place a trade? Well, you probably would have some questions first. Should I place a market order at the current price? But let’s say the price of EUR/USD has gone up since the signal was issued. Do I enter the trade at a higher price? Or should I wait for the price to come back down to the level when the signal was released? If I use a limit order to wait for the price to come back down, how long should I keep it there before the signal becomes invalid? Will the Forex signal provider give me updates?
The example “Go long EUR/USD” has given us minimal information about the trade. What about how we exit the trade? Is a stop loss given in advance if the trade goes against me? Is there a take profit target? Should the stop loss move at all during the trade?
These extra layers of information separate the quality of Forex signal providers and the quality of their service.
Now that we know Forex signals can have different layers of information to help you manage the trade, let’s develop some criteria for finding out what is included in the best signals.
What is Offered by the Best Forex Signal Providers?
As a minimum requirement, a comprehensive trading strategy should always cover the following three items:
- Entry location
- Stop loss location (a stop loss is where you want to exit the trade if it goes against you)
- Profit target
It stands to reason that the top Forex signal providers should include all three pieces of information as part of their Forex signal service.
They may not provide all three parts of the signal at the same time. For example, a Forex signal provider may give the trade entry information first, and later they may release the profit target for the trade. However, the top Forex signal providers should always provide a stop loss along with the trade entry information. Successful traders control their risk as an integral element of their trading, and they can’t do that without knowing when they’ll exit a trade if it goes against them.
Can the signal provider move the stop loss? Yes, but they should only move it in the direction of the trade. For example, as the trade goes into profit, it’s a common technique to move the stop loss to breakeven or higher to capture some of the profits if the trade reverses. This is perfectly acceptable. However, a signal provider should not move the stop loss against the direction of the trade (in other words, they shouldn’t widen the stop loss) because they are then increasing the pre-determined risk for the trade. Rule number 1 of trading: control risk and stick to it!
Depending on the trading strategy used by the signal provider, the profit target may be known in advance, or it may be determined as the market unfolds. Knowing the profit target in advance is useful because you can calculate the reward to risk ratio for each trade in advance. For example, a trade with a stop loss of 50 pips and a profit target of 100 pips will have a reward to risk ratio of 2 to 1. Most successful traders always want a reward to risk ratio greater than 1, meaning they never want to risk more than they are willing to gain in a trade.
Finding the Best Forex Signal providers
What makes a top Forex signal provider? There are main two considerations worth using in comparing signal providers: the performance of the signals they provide, and how easy they are to follow. The second factor is self-explanatory, but let’s take a closer look at assessing performance.
- Track record
The most accurate way to assess performance is from a track record. A top Forex signal provider should compile an ongoing track record of every signal they publish (without leaving any signals out of the record), so others can assess their performance. Some signal providers will use a demo account or live account that takes their signals, and they publish the account performance as a track record. This is a great way to verify their performance because it’s a close simulation to real-world trading: signals should never be mysteriously left out of their performance in hindsight when it’s logged in a broker’s account. In fact, a demo or live account is like someone is testing the signals for you. Remember, a demo account will have perfect trade fills. A live account will likely have slippage, which is a better reflection of real-world performance. Some signal providers may publish select examples of their signals, for example, “Look at this great Euro trade last week that made +100 pips!” These published examples are usually picked to help advertise a service. Don’t accept this as a track record of their service because it’s not!
Instead of using a demo or live account to track performance, a signal provider may keep a written record of the total number of pips made. This is indicative of their performance and better than not having any performance data at all. Keep in mind that different Forex currency pairs will have different dollar values for each pip. That means if you want to match their track record of pips in a realistic way when you are trading live, you will have to adjust your position size for each trade, or you will have to accept some divergence in dollar terms in your performance compared to their stated track record.
- Assessing the Signal Provider’s Risk Control
You want to see evidence that the signal provider can control their risk and that their strategy can handle changing market conditions. One way of assessing this is by examining the length of any drawdowns: how long does it take to recover from a losing streak and get the signals back into profit? Look at the Forex signal provider’s biggest drawdowns, and ask yourself: Would you be comfortable continuing to follow their signals if a similar drawdown happened again?
To further help assess risk control, you should calculate the average size of the winning trades and compare that to the average size of the losing trades. If the average losing trade is smaller than the average winning trade, it means the signal provider has more room to make money if their win rate drops. It also means a single loss can’t wipe out multiple wins; or vice versa, a single win can make up for more than one losing trade.
Very often, signal providers will advertise high win rates for their signals. Be cautious of this as it does not give you the whole picture. Let’s say out of every ten trades, eight were winners. They can claim an 80% win rate. However, if their two losing trades had much larger losses than the average winning trade, you could have still lost money overall despite high win rate.
Remember, a track record is only hypothetical (unless the signal provider specifies that it’s from a live account that can be verified). Real-world trading must account for fills, slippage, spreads, missed trades, etc. It’s rare that you can exactly match the track record of a signal provider, which leads us to our next point: what is the best way to use Forex signals?
How to Use Forex Signals
How you implement the services of a signal provider will depend on two things: how they deliver the signals to you, and your availability to act after you receive them.
Forex signals are usually delivered in two ways: through alerts sent to your device or through a live room environment.
- Signal Alerts to your Device
Many signal providers will use a messaging app such as telegram, twitter, or a facebook group. The advantage with messaging apps is that you can receive them on any device, from a smartphone to a laptop, and they’re free for everyone. They’re also quick to relay information from the signal provider to the customer. Because most Forex brokers allow for mobile trading, you could do everything from your phone without having to be tied to a physical location to follow and trade the Signals.
- A Live (Trading) Room Environment
A live room is where a signal provider will share audio and visual feeds as they deliver their signals. It’s the ultimate immersive experience of sitting in a virtual trading room and trading over the shoulder of an expert. Many live rooms will allow you to ask questions, and some live rooms are set up to teach the trading method behind the signals.
A live trading room is great for short-term day trading style signals because you often need to take market orders immediately to catch the move, or place a pending order just minutes before the price reaches a certain level. Either method leaves little room for delay.
Which Forex Signals Should I Follow from the Signal Provider?
When you have decided on a Forex signal provider to follow, it’s usually best to take all their Signals, especially at the beginning, and not cherry-pick which ones to follow. Otherwise, it’s all too easy to second-guess their judgement and miss their winning signals while taking their losing signals, particularly if you don’t understand the strategy they’re using. If you’ve done your homework and examined their track record in advance, you should have an idea of their long-term performance, and that will help you stay disciplined in executing all their signals. Remember, you can take their signals in a demo account first to gain confidence before diving in.
The Difference Between Market Commentary and Signals
If a service tells you, “We think EUR/USD is going to be bullish today,” that’s not a signal; it’s market commentary because there’s no specific entry alert. If you’re paying for signals, make sure you’re getting specific direction and not just market commentary.
Can You Take the Signals in Time?
Your availability to receive the signals on time and execute them in your trading account is just as important as the performance of the signal provider. In that regard, different types of signal providers can be much easier to follow than others, based on your daily routine.
- Day Trading / Short-Term Signals:
Although the Forex market is open 24 hours a day, 5 days a week, certain times of the day are more active because there is more liquidity and volatility. Typically, the London / New York market overlap (8 a.m. to noon EST) can be one of the best times to trade Forex as it has the heaviest volume of trading and the greatest number of trading opportunities. Some Forex pairs can be very active at other times too, for example, Japanese Yen (JPY) Forex pairs tend to be active at the beginning of the Asian session starting at 6 p.m. EST. A Forex signal provider specializing in short-term trading will want to give their signals during the active periods for their Forex pairs. If you’re interested in catching their signals, it means you must be available to place trades on your platform during those times.
- Swing trading / Long-Term Forex Signals:
Swing trades are trades that are held for days, weeks or longer. Forex signal providers that specialize in swing trading will often produce fewer signals than day-trading signal providers. Swing trades often use advance pending orders, such as limit orders, that will execute when the price reaches a certain level, making them easier to catch than day-trading signals. While you may want day trading signals for the increased activity and potential profitability, for many people, swing Forex signals are a better fit because of personal routines, such as work and family commitments.
Free Forex Signals vs. Paid Signals
Forex signal services that are independently run (i.e., the company does not provide other money-generating services such as brokerage facilities) usually charge a subscription fee for their signals. Many of these paid signal providers offer a free trial or a low-cost initial period for you to test their service. Occasionally, an independently run Forex signal provider won’t charge anything if they want to build their track record and recognition in the industry.
Free Forex signals are usually offered by part of a larger company that offers other trading services; for example, a broker may offer free in-house signals for its clients. The best free signal providers will have a dedicated individual or team with experience that provides the service.
More important than whether the signals are free or not is whether they are profitable or not. You may get free signals or pay very little for your signals, but if they are losing signals, any savings you made from not paying a high subscription fee is wiped out from the losses you incurred by following those signals.
The Pros and Cons of Forex Signal Services
“Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” Nearly every adult on the planet has heard these words in some form or another, and critics of Forex signal providers often quote the phrase. In the context of Forex signal providers, there is some truth to this comparison, but there are some exceptions as well.
When you are following a Forex signal provider, you are not building up a skillset to learn how to analyze the market or developing a trading method. You are taking signals, i.e., the Forex signal provider is giving you fish but not teaching you much about fishing. However, the process of following a Forex signal provider can teach you important lessons about the market, which can help you develop your trading abilities.
If you are new to trading, deciding to sign up with a Forex signal provider means you will learn how to use your broker’s platform to place trades on it. Don’t take this for granted: it’s a learning curve at the beginning to work out the different order types, such as market orders, limit orders, and stop orders. Secondly, as part of the process of placing trades, you must make decisions about position size and leverage. For example, do you trade the same lot size for every trade? If you do that, you’ll notice some trades will make more dollars per pip than other trades on different Forex pairs. You’ll also notice that a 50-pip loss will cost more in your account than a 20-pip loss if you trade the same position size. So, you must decide if you want to adjust your position size, to make the dollar risk per trade the same for every trade. Now you’re learning about managing risk on your account – a core tenant of successful trading.
While you are following signals, you will see some trades go against you before they hit their profit targets. Because of your inexperience, you may close the trade early, or you may widen the stop loss to give the trade more room to recover but still get stopped out. This teaches you the lesson of sticking to the original plan. As you take losing trades on some of the signals, you gain acceptance of the risk that is involved as part of trading, and seeing some losing trades teaches you not to risk too much of your account on a single trade. Over time, if you see losses made back with subsequent winning trades, you learn not to panic during a losing streak. All these lessons can be valuable in sharpening your trading IQ and discipline.
Of course, the biggest plus point of following a Forex signal provider is to make money in your trading account from their signals. Maybe you understand the opportunity that the Forex markets present, but your work or family circumstances don’t allow you to make the time to learn how to trade. Or you may already be a successful trader but want to diversify the types of trades you’re taking. Forex signals can bridge that gap by helping you access another trader’s expertise.
Back to the analogy about giving a man a fish: I’ve been to plenty of restaurants and eaten meals knowing that I’ll probably never learn how to cook at the level, and I’m okay with that. I’m fine if people want to profit from some signals from time to time without learning everything behind the art of trading.
The Most Reliable Forex Signal providers
Some Forex signal providers deliver a high-quality service run by committed professionals that want to add value to your trading. Then there are some Forex signal providers that you should avoid: perhaps the people behind the service do not have the experience, or they don’t report their results in a truthful way.
Whenever you’re considering any service in an industry, near the top of the list of requirements will be reliability. To assess the reliability for a Forex signal provider, you want to understand the person or team behind the service, and not just their results. Does the Forex signal provider show the biographies of the team? Are they specializing in a trading method in which they’ve spent time building expertise? Do they publish contact details? These additional pieces of information help build a picture of the service beyond its raw results. Don’t be afraid to contact a Forex signal provider directly and ask them questions to fill in any missing pieces of information. Success is often earned through preparation.
The Bottom Line
Forex signal providers can deliver a valuable service by helping you access another trader’s expertise and receive specific instructions on what to trade, where to enter and where to exit a trade. They’re doing the hard work of analyzing the market and making trading decisions for you. There are secondary learning outcomes when you follow a signal service. Taking trading signals will force you to learn how to manage your risk in trading, for example, by forcing you to make decisions about position sizes and learning how to execute different order types on your broker’s platform. These are valuable skills to learn if you eventually decide to trade for yourself. By itself, a Forex signal provider won’t teach you how to trade.
Before signing up with any Forex signal provider, examine their track record and confirm that they give the three main parts of a signal: entry, stop loss, and profit-targets. Make sure you’re available to take their signals at the times of the day they publish them and ask questions about who’s behind the service.
What is the best Forex Signal provider?
A top Forex signal provider will give you all the necessary pieces for a complete trade setup: trade entry, stop loss, and profit-target, plus any other relevant information such as how long the signal is valid before the entry order should be cancelled. They will also have a track record that’s easy to verify and perhaps a trial period where you can get an idea of how they operate before committing to their service. Remember, if they advertise the success of individual Forex signals, that is not the same as a track record.
Who is the best Signal provider?
The best signal provider for you will be one whose results meet your expectations for profitability and whose signals you can execute during the times of the day the signals are published. Once you’re satisfied with a signal provider’s track record and results, find out what times of the day they release their signals and how much advance notice they give for you to place orders. Most Forex signal providers will use a messaging app to deliver the signals to you, so that means you can pick them up on smartphones as well as laptops. Given that most brokers allow for mobile trading, you could receive signals on your phone and place orders directly on your phone too. This can give you a tremendous amount of flexibility.
Are Forex Signals worth it?
Yes, provided you have done your homework and examined the Forex signal provider’s track record, Forex signals can add value to your trading account. Don’t gravitate towards Forex signal providers because they are free or cheap; if they deliver poor signals, it will cost you more in losses in the long term. Instead, think about the value they add to your trading account. As well as hopefully giving you profitable trades, a Forex signal provider will oblige you to learn about managing your risk and leverage because you will have to decide how much to risk on each trade. You will also learn about how to place different order types on your broker’s platform. As you’re placing trades, you will watch the value of your account move up and down (hopefully increase in value in the long-term). There will be times when trades go against you before hitting the profit target, or they get stopped out. Going through these experiences and sticking to your trading plan builds discipline and strong trading psychology. These are valuable skills you will always need as a trader.
Where can I get Forex Signals?
There are many Forex signal providers available to retail traders; a quick search online will reveal hundreds. Some Brokers have Signal providers they work alongside. DailyForex.com offers many sources of Forex Signal providers.