Forex signals are just technical analysis of the foreign exchange market.
Most companies use a combination of indicators to know market trends, entry and exit points.
Different types of signals can be derived From the currency chart using different types of technical anylysis, some which are:
- Volume Indicators: These are used to determine market interest. High volume (especially near the bottom of the market) can indicate the start of a new trend while low volume shows the uncertainty of investors.
- The Simple Moving Average(SMA): These indicates buy signals when currency prices rise above the average line. Sell signals occur when the price falls below the moving average line.
- Bollinger Bands These indicates the potential changes in the foreign exchange market. Sharp price changes tend to occur when the bands tighten while prices that touch one band tend to go all the way to the other band.
- Moving Average Convergence Divergence(MACD): These studies have a signal line that is used to generate a buy signal (above the line) or a sell signal (below the line).
Other indicators like volatility and momentum can be used to reinforce forex signals provided by other sources. Taken together they form a relatively reliable source of information about how the market is behaving.
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