Signal Service Providers

Types of Signals Services

There are two important things to remember about trading signals. Firstly, they are not infallible and most will come with a warning about accuracy and using them at your own risk. Secondly, you must use them as a tool to complement a personal trading strategy, not as a replacement.

Basic Signals

Trading signals use a combination of inputs taken from different disciplines, but not necessarily in equal measures. The biggest component of these is technical analysis, which focuses on historical data, such as how supply and demand have previously affected the price and volatility of an asset. Other parts are covered equally by quantitative and fundamental analysis, which are based on the facts and figures specific to the asset itself.

Free Signals

With the amount of access to the Internet, it is no longer necessary to pay for signals services. Many modern brokers woo clients by offering them free signals as a trading ‘perk’. Others provide access to copy trading, which is great for new traders, but perhaps not the ideal scenario for those of you who already have their own strategies. There are also multiple free signals services advertised online, but beware, whilst some of these are excellent, some are not worth the effort of downloading them.

Signals Software

Not all software is equal and signals software is no exception to that fact. You will find plenty of choices available, but finding the right program, which fits seamlessly with your trading style can prove a bit more tricky. Depending on the diversity of your portfolio, you may need more than one piece of software to cover all angles, but there is always the potential for a more professional approach by using an investor services package.

Signals Education

You will see if you take a look through our stock broker reviews that some do provide extensive trader education opportunities. Even if the ideal broker for you does not have this facility, the Internet provides thousands of tutorials on virtually every aspect of trading, including how to use indicators and signals for different purposes and even how to code your own.

Benefits of Using Signals

Signals and indicators are only useful when they are implemented by following a robust trading strategy, which you must keep sight of at all times. Always be ready to adjust the software if the signals you are receiving become conflicting. For example, if you were to receive a ‘buy’ signal based one parameter and a ‘sell’ signal from another simultaneously, then something is not quite right!

There is undoubtedly a vast array of indicator software out there to choose from, with many different functionalities. Not all of them will have a purpose for you, but the list below comprises a few we feel are ‘essentials’ for the majority of stock traders:

• Moving average (MA)
• Average directional index
• Standard deviation
• Bollinger bands
• Relative strength index (RSI)
• Fibonacci retracement
• Exponential moving average (EMA)
• Stochastic oscillator
• Moving average convergence divergence (MACD)
• Ichimoku cloud

To complement your indicators, you will also need to create signals to inform you when your parameters are met and this is where your trading strategy gains importance.

Ideally, you want to achieve a signal that alerts you to ideal market conditions, so a signal working in conjunction with a MA indicator could let you know when prices rise or fall beyond the usual daily highs or lows. A volume surge alert will give you a ‘heads-up’ for impending market volatility, perhaps one which has come about due to a global economic announcement. Another option you may wish to consider is sentiment extremes as it is often the case that actions (or reactions) of other traders will cause a change even before the market fully reacts to it.