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Friday, March 25, 2011

How Using Free Forex Signals Can Benefit Novice Forex Traders

Free forex signals seem to be everywhere on the internet these days. There are literally thousnads of companies and websites who all offer these services. In this article, we ask if there are any catches, and how such forex signals can help a trader's activities.

As previously mentioned, it appears that wherever one turns on the internet, there are always offers to sign up for free forex signals. The rationale for the website or company in question is often to build their business, and to get as many website visitors as possible. This is perfectly legitimate, and a good way to build a business for forex traders is to offer free forex signals. After all, many website owners are experts i nforex trading, and are actually full time forex traders, so it makes a lot of sense to share their trading ideas, and to build a community this way.

The free forex signals can take a number of forms. Quite often, one has to sign up for a service, and the signals are sent by email as soon as the trader has taken a trade. In this case, it is important that the recipient can receive the email as soon as possible, as otherwise the price may have moved so quickly that the forex signal is no longer relevant.

Free forex signals can be useful for a novice forex trader for a variety of reasons. The first reason is that it gives the trader practice in making a series of trades on a demo account. Whenever a novice trader starts to trade, he or she does so on a practice account. It is very good experience for a trader to become familiar with this trading platform, and a good way of doing this is by making as many trades as possible. By signing up for free forex signals, the trader can become proficient in the trading platform in a much quicker time.

Whilst lots of sites offer them, but how do you know they are all genuine, and provided by professional forex traders? How silly would you feel if someone was just tossing a coin, and if it was heads, he would advise to buy, and if it was tails, he would advise to sell?

This raises another important issue, and that is that it is very important to use a demo account in any case to test out any free forex signals. The provider may make wild claims about the perfromance of the signals, but it is first necessary to test out these claims, and to use the signals on a demo account before trading on a live account. The question is then, how long to trade on a demo account before using them with real money. In my view, it is necessary to have 3 consecutive profitable months using the signals - only then can you have any confidence that the trade signals will be profitable.

A further thing that you need to check is how recent are the prices that the free forex signals relate to. What do I mean by this? Well, when you receive the signal, you need to know that the provider has just this minute sent the signal, and that the advice that he has given, is still valid. For instance, if the signal is that you should buy GBP/USD at market, and to take a 50 pip profit - you need to know exactly at what price he was advising you to take the trade.

This is vital - as if he wanted you to buy at 1.6050, and to exit at 1.6100, but you only received the signal when the price was at 1.6080, then you might lose out on the trade, despite following the advice precisely. For this reason, it is recommended that when you recieve trade advice like this, you ask the provider to tell you exactliy what price is the market price when he sends the email. This way you can see how much price has moved. This is crucial in the forex market, where price can move very quickly in a very short space of time.

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