People provide forex signals to traders to give the best ideas, interpretation, and guidance as the markets open. For most people, it is easier to gain money while trading charts and make buy or sell decisions no more than once a day.
The signals are made to be as useful as possible. Most of the time, the tool they use within the signals is the identification of exact prices or narrow price ranges where the market might turn.
Generally, people know this as ‘support and resistance, but they can also think of them as pivotal points.
The Use of Forex Signals
All signals start with a discussion of the prospect that the previous day’s signal generates any open trade in the same currency pair.
After that, the piece goes on to give the best times of the day in which to open any new trade, and they might risk the position size on a trade that day.
Then, it will determine possible support and resistance levels with an accompanying illustrative chart. Going with the signals indicates taking note of these levels and observing during the suggested hours to see if the price hits any of them.
If the prices hit a resistance level after going up, traders wait to see a bearish turn in the price. And this means they believe it is going to go down.
Then, when the price touched a support level after going down, they wait to see a bullish turn in the price – meaning traders believe it will go up.
The problem now is how to identify a turn in the price when it has a high probability of becoming the best point in entering a winning trade.
Identifying a Price Turn
As the candlestick completing the turn closed, what traders will do next depends if they are entering a long trade where they want the price to move up or a short trade where they hope for the price to move down.
In the long trade, it’s understandable to place a buy order one pip above the turn candlestick’s high. And this is with a stop loss one pip below the lowest price reached in the move.
On the other hand, in a short trade, the best way is to place a sell order one pip below the turn candlestick’s low. And this is with a stop loss one pip above the highest price reached in the move.
Now, for a trade to move forward, the price needs to reach the level where the order is set. Typically, the best trades occur fast. The longer the time elapses before it hits the price, the less attractive the trade becomes – ‘decaying’ over time.
So, the best thing to do when the trade entry has not been triggered an hour after entering the order (during the next one hour candlestick), it makes sense to cancel the trade.
One more reason to cancel the trade is when the price reaches the stop loss before the entry becomes triggered because this means that the support or resistance level became unreliable.
To do this, it is vital to check the screen from the time of entering the trade until the entry is triggered or until the time limit for an entry expires so traders can cancel the trade manually.