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Currency Trading Signal

A currency trading signal is normally generated by a specific set off rules to open and close positions in the market, although some people of course simply just generate a currency trading system from their view of the currency pair at the time.

The rules for currency signals can be specific rules or more flexible but whichever method you choose, the success of your currency program or system will depend on how accurate they are. Here we will look at currency trading signals in more detail and first, we will start with some myths which traders believe about them which causes their currency trading strategy to fail.

Myths About Trading Signals

one of the biggest myths is you can trade with 90% accuracy or more and this idea is sold by the vendors of junk Forex trading robots or Expert Advisors and its not true. Even the best Forex traders in the world can't achieve this and neither will you and a accuracy rate of 30 – 50% is probably the best you will achieve but you can make a huge amount of money, if you cut your losses and run your profits. Its the difference between the size of the profits compared to losses which is the key to making long term profits – NOT the percentage of trading signals you get right.

Another myth about Forex signals is - the more complex the rules are which generate the signal, the better your market timing will be. The problem with this logic is – if you make signal generation to complex, it will have to many inputs and this means losses. A trading signal should only have a few rules to generate it and its a known fact that, simple currency trading strategies, work better than complex ones, so a few rules is better than many.

Another myth is - that Forex signals can make you a steady income each month but this is simply not true. You can make money long term trading currencies but you need to judge your performance over a year or more. In any yearly period, the markets will give you a string of losses short term and these can last for a few weeks or even a few months. However, if you trade your system with discipline and have good money management, you can ride out these periods of losses and make great long term gains.

The above myth about making a steady income with your trading strategy is based upon, the idea that the markets move to science or some higher force and can therefore, be predicted in advance but this is simply not true. Forex markets cannot be predicted and when you trade, you are trading probabilities rather than certainties.

The above are myths and if you believe them, then you will fail to make money trading currency markets. Now, we will look at how to generate trading signals to make bigger currency trading profits.

Generating Currency Trading Signals for Long Term Gains

The first point to keep in mind is the longer the time frame you choose to trade in the better the odds. The first point to keep in mind is most volatility in a day is random, you won't get the odds on your side in this short time period so don't try. This means Forex trading systems based upon scalping, day trading and high frequency trading should be avoided.

Instead build a set of rules which generates trading signals which aim to catch moves which last a few days to around a week ( swing trading) or weeks or longer ( long term trend following), if you trade in these longer term time frames the odds are better and your FX trading profits will be bigger.

You need a simple set of entry rules and exit rules so when you enter the market you also have a pre defined stop loss as well and in terms of a target, you can have a specific price level to aim at or trail your stop.

In terms of your trading signals, they should be seen as part of your overall FX trading strategy and by this I mean - you need to see them all, the same in terms of profit and loss potential. This means not over exposing yourself on any one trade. Money management is the key to Forex trading success - so make sure you focus on capital preservation first and the profits will take care of themselves.

Automatic Trading Signals or Manual Generation?

Some traders want to use a automatic FX trading systems, some want a manual override and others, simply want to generate currency signals purely on what they see and trust their own judgement – so which method is best?

There is no best method of generation - but personally, I like a set of flexible rules, to manually approve each trade but this is personal preference which ever way you do it – make sure you have confidence in what you are doing, operate sound money management and trade with discipline and you can make some great currency trading profits.

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