Generally, the type of trading signal used is determined by both its function and the way in which it operates.
However, there are two distinct categories when it comes to forex trading signals:
Automated trading signals occur when traders rely on software to search for signals or indicators. The software will automatically interpret the action that is required, for example, whether to buy or sell a specific currency. Unlike manual signals, which involve human emotion and judgement, automatic signal methods can process far higher data volumes. Traders who use software to detect certain signals can track the charts 24 hours a day, without missing potentially significant signals.
There are several ways in which traders can receive trading signals. Traders choose different alert methods depending on their own specific requirements and objectives.
Traders can be informed by email, SMS or message notification from other third-party applications, such as WhatsApp and Telegram. These signals usually form part of a paid service, as it is a convenient way of receiving up-to-date alerts on-the-go.
Traders can use automated trading software via the MetaTrader platform, through expert advisors (EAs). This will automatically generate or enter positions in real-time. The method is also referred to as using trading robots and can either be free or paid for.
The use of forex signals is simplified through copy trading services, which link together the accounts of both the provider and the trader. It allows for fast execution, meaning that when a signal provider places a trade or enters a position, it automatically enters the trader’s account. Copy trading can take place on the MetaTrader platforms, including MT4 and MT5, which offer trading signal software. Under this method, users will benefit from access to a wide range of trading indicators and tools. Traders will be able to trade directly from the chart and there is also the potential to become a signal provider themselves, if they so wished.
Traders can choose to have a professional trade on their behalf, through a managed trading account service. The client trader will first invest money into an account and sign a limited power of attorney agreement. Once these steps are complete, a manager will trade the account and charge a fee for the service. The account remains within the control of the client trader and the manager is only authorised to trade on the account and not deposit or withdraw.