How to read a trading signal

Trading Signals from Signal Providers are sometimes deceptive especially when you don’t know how to read them. Traders usually miss out on certain information before relying on the provided inputs and applying them blindly.

Assessing a Useable Trading Signal

We at SignalATM have collated most important parameters that you may use to assess a signal before you consider them usable in nature. Consider the below Checklist

• Currency Pair

  The script / currency pair like (EUR/USD, GBP/JPY)

• Direction

  The direction of the signal whether a “BUY” or a “SELL” Signal

• Entry Price

  Entry Price is the price level at which the signal provider suggest to place the trade in the Market

• Stop Loss

  Stop Loss is the price where the trade should be closed, if the market turns against you. This is a risk management feature and is very important for long-term profitability. Always use this. The Stop loss if modified, should always be to reduce the potential risk.

  Under certain circumstances, the signal provider may also recommend the modification of Stop Loss to cut risk margin or extension of the Target Price to increase the profit margin or modify the timeframe based on changing market dynamics

• Target Price

  The Target Price is the price at which the signal suggests to book profits, if the market is going your way. Taking out the profits at the right level and time is equally important as protecting yourself using the Stop Loss

• Status

  Signal must tell the information whether it is Active, Live, Abandoned or Closed. This helps a Trader to decide whether to execute the trades based on this information>

  Active

  The Active status means signals can be readily used to enter in the market (consult your financial advisor before using the information). The signal is yet to go ‘Live’ in the market. Keep a track of this signal, it may get ‘Abandoned’ if the price in the market has not reached the ‘Entry Price’ of the signal withing the specified ‘Validity’ Time.

  Live

  Live status means the price in the market has hit the Strike Price and is working in the market. This signal will now wait to get Closed till it reaches the Target Price or Stop Loss.

  The Live signals can be closed in case of TimeFrame expiry, or market price hitting the Target Price or Stop loss levels. Also, the Signal Provider may close of the trade at levels where he feels is right to exit at that levels.

  Closed

  Closed status means the signal has exited the market due to price hitting the Target Price or Stop Loss. It can also exit if the signal provider has prematurely Force Closed the signal based on his assessment of the market movements. The signal can also close the the prevalent price if the Timeframe of the signal has expired This will result in a compulsory profit or gain.

  Abandoned

  Abandoned status means the signal could not go Live in the market owing to Price not hitting the Strike Price of the Signal before the Validity time. The signal can also be Force Abandoned by the Signal Provider based on his assessment of the Market Condition before the Validity Time. The signal will not result in any profit or gain.

• Validity

  This is the time within which the Signal Provider expects the signal to go Live otherwise the signal expires in Abandoned status. This period from Posting of Signal to Validity time gives usability of the signal to the Trader. This also provides relevancy to signal provider analysis as market dynamics may change over period

• Time Frame

  This is the time within which the Signal Provider expects the signal to go reach the expected Target Price or Stop Loss, otherwise the signal will close automatically. This period from Posting of Signal to TimeFrame shows the style of the signal provider on which timeframe he has analysed the price action charts. This conveys that Signal Provider has predicted the market dynamics may behave in the way he analysed for that specific TimeFrame.

SignalATM provides all relevant information for a Trading Signal which allows Traders to make an informed decision while choosing a Trading Signal. In the next article let us understand how to assess a good Signal Provider. Meanwhile get access to the Premium Trading Signal by login to SignalATM