When it comes to Trading Signals, they can use a wide number of different types of inputs from different disciplines. Usually, technical analysis is considered to be the major and most important component. However, inputs from other disciplines like quantitative analysis, fundamental analysis and economics are also taken into consideration. They can include signals from other trade signal mechanisms and sentiment measures. The primary objective is to offer the traders and investors a proper method which is devoid of emotions that would help them to buy and sell securities and different other types of assets
Apart from just triggering the process of buying and selling, trade signals can also be used for the purpose of modifying a portfolio by determining certain factors like the right time to buy more of a particular sector like technology. As far as bond traders are concerned, they can have signals for the purpose of adjusting the duration of their portfolios by buying one maturity and selling a different one. Besides, it can also play an important role when it comes to allocating the asset class like shifting of money among bonds, stock and gold.
As far as complexities of trade signal is concerned, there is no limit to it. However, when it comes to the traders, they prefer to keep matters simple by using only a couple of inputs. In order to meet the practical purposes, it is believed that managing a simple signal generator is far easier and testing is periodically in order to find out which are the components that require be adjusting and replacing. By using too many inputs, the complexity would increase which would require more time for the trader to offer. There is one other thing that needs to be taken into consideration. It is the fact that the dynamics of the market is changing quite frequently and they are changing at a rapid pace. Therefore, complex strategies are not always the best options to go about it.
What is a Trading Signal?
As far as trading signal is concerned, it is nothing but an action being triggered either for the purpose of buying or selling of assets and securities, which is generated by proper and scientific analysis. This process of analyzing can either be done using different types of technical indicators or different types of mathematical algorithms can also be used for the purpose of generating them. As far as using mathematical algorithms are concerned, they are determined based upon the condition of the market, where different factors like economic indicators are being taken into consideration
The Process of Creating a Trading Signal
When it comes to creating trading signals there are different types of inputs that are used. Traders can combine different types of inputs for the purpose of creating a trade signal. Here are a couple of them
Break Down or Break Out:
These can include different types of combinations like rectangles, triangles, trend lines, head-and-shoulder
Moving Average Cross:
Most of the investors watch fifty and two hundred day moving averages. However, there are many others that are commonly used. The input point can be when the trading activities cross the below or above the average mark. Or it can be when the two different averages cross.
When it comes to a new move in the market, often high volume is considered to be a precursor to it. Using open interest is also an important option as far as futures markets are concerned
Rate of Interest:
Changes and variations in the rate of interest can prove to a useful indicator when it comes to changes in commodity market and stock.
All types of markets have the tendency to flow and ebb over a period of time. It is fact even if the market is showing a steady trend on in a condition which is non-trending in nature. The seasonal cycles of stocks is one of the most commonly known cycles “Sell in May and go away” which plays an important role in the process of determining whether a particular strategy is operating in weak or strong phase of the year
When it comes to measuring the volatility, there are many ways to go about it. Like other indicators, extreme low or high volatility can play an important role in the process of triggering market changes.
Valuation is also an important aspect that needs to be taken into consideration while trading signals
Sentiment extremes, which used as excessive bullishness, contrarian indicator according to the actual trading activity or surveys which can suggest the market tops. On the other hand, market bottoms can be lead by excessive bearishness
The Principles of Trading Signals
It is impossible to find 2 trading signals that are similar in nature. The reason is that every single system uses its own approach and method to generate a signal. However, there are 2 different methods that used, which are
- Technical analysis of all the data collected about the past trend and price
- Gathering information about the present state of affairs and making proper forecasts on the present situation can improve.
When it comes to technical analysis, there are a couple of advantages which it has to offer. Qualified and experienced professionals in this field with required expertise programmed the system. The System operates automatically after programming. This approach has proven to be quite useful as it is devoid of any sort of bias, impassiveness and other behavioral decisions. One of the main drawbacks of this mechanism is the lack of flexibility. The intelligence of the machine at times can prove to be insufficient when it comes to generating proper and authentic signals.
There is another method which follows. This method is dependent on the opinions of the analysts who program the systems and interacts with them. It is the fundamental and basic analysis of the market that influences their analytics. Besides, the data gathered by other important tools like moving averages, Fibonacci levels and others are also taken into consideration. This type of approach considere to be more effective and efficient as more volume of data is taken into consideration for making the forecast. However, it needs to be mention that it is not free of errors. Mistakes made by these experts which can lead to something very serious for the traders.
What are the Pros and Cons of using Trading Signals?
One of the reasons of using trading signal is the fact that they indicate the favorable price and time either sell or buy an order. There are many such trade signals which are sent to the traders over their emails as alerts. Besides, alerts are also sent via txt messages, pop-up messages, tweet, RSS and other by other means of communication. These signals are being generated by the specialists who have expertise on this subject; besides, there is automated software that is also being used when it comes to generating these signals.
One of the main purposes of using a trade signal is to assist the trader towards making informative decisions. Yet they still contain certain flaws. There are different benefits that can be derived from these trade signals; however, they also come with some disadvantages. In the following section, you will be offered a brief insight into some of the benefits and flaws of trade signal
Advantages of using Trading Signal:
Talking of advantages, there are plenty which trading signal has to offer. Here are some of them
Ideally, a trader should keep a close eye on the market 24/7; however, practically it can be very difficult and in some cases even impossible. This is where these trade signals come into the picture. They help to simplify the activities related to trading. If a trader is confident about the signals that he receive, he will be able to focus more on his trading strategies instead of looking for new trading opportunities
There are certain signals which alleviate the risk factor as the traders are being intimated and updated on a real time basis as far as market fluctuations are concerned. If those who are proving the signals are experts in the field of trading, in that case, the chances are more that a greater level of accuracy and precision would be presented by the trading signal.
there are signals generated by certain companies for their traders which presents more opportunity to learn and also presents them with more scope for understanding the concepts of the trading market. Through proper analysis of the trading history and the chart, a trader will be able to assess how accurate the entry point is and at the same time find out which factors affected the trading signal that was triggered
Lastly, these days, in the world of internet, there are huge numbers of signals that are available on the web. There are many signals which are available at free of cost while there are others which can be availed after paying a certain amount of fees.
Disadvantages of using Trading Signal:
There are different types of benefits that trade signals have to offer. However, there are also a couple of disadvantages which can be associated with it. Here are some of them
Perhaps, one of the major drawbacks of trade signals is the fact that there are numerous scams around which give the impression of being authentic and genuine signal. Ideally, when it comes to trading signal, they generate and sent by the professional analysts or traders. However, it is not always possible for the trader to know who actually the signal provider is. Therefore, at times, accepting the trade signal can prove to be quite risky. The only option available to the trader to know whether the signal is an authentic one is by going through the transaction records and also by viewing the detailed statistics of the provider
There is another important aspect :
… you should mention in this context, which is the cost factor. As far as free signals are concerned, they seem to be quite attractive; however, in most of the cases these free signals prove to be of no use. When it comes to free signals, in most of the cases, they are generate by the traders who have very little or experience whatsoever. Therefore, it is not at all advisable to go for the free signals. They might sound quite lucrative; however, considering the overall value addition, they can cause harm instead of helping the trader. When it comes to paid signals, there are quite a few available which are generate by some of the most reputed and experienced traders; however, availing their services can prove to be quite expensive
trading signal also generate by certain automated software. These types of signals are not always reliable. The reason being that the software which is responsible for generating the signal is not always capable of processing the fundamental data in an effective manner. No matter how reputed the agency might be, the chances of generating misleading signals are quite high.
Despite the fact that there are various flaws that can be associated with trading signal; they have proven to be as one of the most effective and reliable mechanisms for the traders. Those who planning to take help of trade signals, for them, it is recommended to go for the reputed names as they are likely to provide more authentic and genuine information. Yes, their services are chargeable; however, when it comes to authenticity and reliability, they are a much better option as opposed to the free signals which are easily available over the internet in abundance these days.
Click now or later on the question mark icon for an introduction to our platform in less than a minute.
We recommend following this tour on a desktop PC. If you are using a tablet or a phone, please try holding it in a landscape position.
Introduction to our platform in less than 1 minute.
Click on a system name to see this system with all the statistics in a large chart.
If you add a system to simulation later, use the - and + keys to control the risk per trade. An explanation can be found above the - and + keys when you mouse over the i - icon next to 'Risk per Trade in%'.
The Risk control panel also shows you how the adjustment changes the risk of the system. For a detailed description, now mouseover the i - icon next to Risk control .
In this menu you will find over 100 tested trading systems. Only the best 10 systems per currency pair are displayed.
Now set the slide switch of any system to "On". Repeat this for up to 10 different systems to create your own PlentyFolio.
Now click Simulation to go to the simulation page. You will then see your newly activated system with all statistical key figures and a large chart in the middle of the screen. Try it out!
The number of your selected trading systems sending signals to your account can be found in this circle.
As a registered user, you can send the signals from this system to your account by clicking "Add to Plenty EA" .Now click on a green "Add to Plenty EA" button to end this tour and sign up for a free demo account. Then start by clicking the question mark icon ( In the menu next to the "LOGIN" button), re-introduce the guide to learn how to use the Plenty EA.
Your chosen strategy has now been added to your account. You'll find the number of strategies that send signals in a circle.
Demo EA sends the signal to your trial account and Plenty EA to your live account.
To switch to the account view, click Demo EA / Plenty EA.
This is the end of our short introduction. You are now in your account view. The newly added system can be found on the right in the Trading System List (TSL). Click on the button "ALL SYSTEMS" to open the TSL.
For a detailed description of using our platform, see Tutorials .