Defining Forex Signals

To make a successful trade, you need to know what to trade and when. This is where forex signals come in. They are often suggestions that tell traders – both novice and professional – of instruments that might be appropriate for buying or selling. They can be sent through apps in real-time or using Telegram and other related apps.

Forex signal providers will perform technical analysis of charts, patterns and indicators and determine suitable points of entry and exit. In some other cases, these forex signals might depend on forex news – but this is not the usual case. And with the rapid advancement of technology, it’s now possible to generate these suggestions using algorithms.

Automating Forex Signals

Artificial intelligence is taking the forex industry by storm. Just recently, in 2020, AiThority reported that over 90% of forex traders used robots to participate. On top of that, Analytics Vidhya suggested that about 49% of traders believed that as AI technology evolves, the trading industry would improve alongside it. The power of this technology lies in its ability to analyze vast amounts of data and give meaningful insights in real time.

As we have already mentioned, traditional methods of generating signals were quite complex and prone to human errors. Plus, they also required constant monitoring of the market, which made them time-consuming. With AI, however, it’s possible to streamline the trading process. This technology assesses historical market data patterns to derive helpful insights.

AI tools like Making Invest and AI-Signals have also made it possible to access timely alerts. Making Invest, for instance, can send over 20 trades per day. Using these tools can actually be a great way to get ahead, especially if you intend to avoid impulsive decisions. It’s worth noting, though, that AI forex signals are not usually created equal; some can be more reliable than others.

More Reasons to Consider Automated Signals

If you are a newcomer in this industry, it can sometimes be easy to blow your account. So, automated signals come in handy as trading aids as you get more knowledge about forex. These signals can also boost your confidence about the market, especially if you aren’t confident about your analysis.

While humans can sometimes be limited when it comes to following all forex pairs, trading robots cannot. Because of their computational capacity, robots can give signals on stock indices, crosses and other commodities as long as predefined conditions are met. Plus, you will not have to spend the whole day in front of your screen monitoring the market – the robot does all that for you.  

What are the Downsides of Automated Forex Signals?

Compared to humans, robots are quite inflexible. They can’t make decisions for themselves, particularly because they are programmed to operate in a specific way when certain conditions are met. This can be disadvantageous, especially when there are sudden changes in the market.

You don’t want to even think of the dangers your account may face if viruses cause a technical hitch. Just encountering a technical error in the software may increase the leverage, which could put your account at risk with just a single trade. A good example is when Knight Capital, in 2012, nearly became bankrupt after its numerous trades disrupted the NYSE. They actually lost about $440 million within 45 minutes.

Another risk that traders may expose themselves to when they use automated systems is over-optimization. This happens a lot when you excessively customize your system to historical data, creating a sense of accuracy that may not be efficient in live trading. In fact, QuantStart revealed that when you over-optimize your strategy, it can reduce annualized return by 40% if used on out-of-sample data.

Overall, it is clear enough that technology has significantly transformed the forex industry. From the times we generated signals manually to now, where we can automate the whole process, technology has wrought wonders for traders. And as we have not reached the peak of innovation, you can expect future advancements to make forex trading even more seamless.

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