Friday, August 20, 2010

Forex Strategy

Forex Signals

What are forex signals?

Forex signals are essentially any piece of information or news which can affect the forex market (i.e. the price of any given currency exchange market) positively or negatively. For example, when Greece, a member of the EU which trades Euros announced it was going to go bankrupt if other nations did not assist, it’s financial situation, it drove down the price of Euros. Depending on one’s strategy, one could have then bought Euros at the point which they thought was the lowest price of Euros, or sold their Euros immediately from the high price which they bought it to avoid losing money. Because this was such a drastic announcement, almost all currencies, (if not all currencies) gained on the Euro on that day, which is a defacto loss on the value of the Euro, and even the following 3 or 4 days.

Most forex signals will drive the market up or down by a tiny fraction of a percent from which people will gain or lose. This requires a high attention to detail since such drastic signals only happen a few times a year. To emphasize the point, in our example, we experienced the most drastic negative financial forecast by Greece which drove down the price of Euros vs all other currencies in full percentages. Usually, however, when dealing with forex, we are working with 1/1000 of a percent up to 1/100 of a percent or what’s called pips.

An example of a smaller signal which can affect a currency negatively or positively, is what major news outlets are broadcasting. The information, (“signal”) can be an opinion, a fact, or a mistake – it does not necessarily have to be true, false or corroborated, but rather, the trader can know that today CNN is publishing on their website a negative forecast for jobs by an independent polling service in the USA and this can certainly affect the value of the dollar. For this reason, it is imperative to have wide knowledge of what is currently being broadcasted by governments, tv networks news outlets, and even major websites in order to have the most up-to-date signals.

Further suggested reading includes: Pips

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