Trading signals are methods used by traders to identify entry and exit points in the market. These can be based on technical or fundamental analysis or even on events in the past. It is a series of rules developed by experienced traders to get an edge over other market participants, who usually act more emotionally than logically.
A trading signal should consist of four elements: period, indicator, entry point, and stop-loss level.
The trader has to define the period he will be working with for his trades. Typically each trading signal takes about a week to finish a complete cycle before the trader decides whether it is time to close this active trade or not. It would be best to choose the time frame for your trade.
Here you need to state which technical indicator will help you find a potential trading signal. There are numerous indicators available on the MT4 copy trading platforms; some can be very helpful, while some might not be required. A good example is the Moving Average Convergence Divergence (MACD) indicator that uses moving averages to distinguish if the price is likely to rise or fall. However, it doesn’t provide any direct trading signal.
The trader enters his active trade based on his chosen entry method and setup. The most common methods include watching for candlestick formations like a pin bar or engulfing pattern, then testing its validity with an indicator or mathematical formula.
A stop loss is placed at a predetermined level where the trader will be exited from his active position to prevent further unnecessary losses. There are numerous ways to calculate stop-loss, including fixed-distance or based on the ATR indicator.
Trading signals are just tools that provide traders with guidance for entering and exiting markets. They should not be used because copying someone else’s trade means assuming all risks associated with it, meaning that if something goes wrong, you won’t have anyone to blame but yourself.
Choosing the right signals that fit your trading style and account size is essential for ensuring smooth and consistent returns.
The following trading signals are popular among Australian Metatrader users:
The Gartley pattern measures potential support and resistance while using Fibonacci retracement levels to find the perfect entry and exit points for a given trend.
The Gartley 212 trading strategy is based on this formation, but instead of using the 0.618 Fibonacci retracement level, the maximum price of the cycle is used instead. It allows you to buy when prices are low and sell when prices are high, making it easier to double your return on investment for each trade that ends up being successful.
The bat pattern uses an extreme curvature within part of a more significant degree wave to determine potential reversal points at critical Fibonacci levels between 38% and 62%.
The bullish shark pattern is a more significant degree counter trend trade that occurs before the start of an uptrend. It’s achieved by looking for the minimum bearish correction during a more significant degree bullish trend to get in near the lowest price possible while still being able to exit before significant resistance begins.
Three Black Crows
The three black crows pattern starts with locating extreme bearish retracements following a more significant degree uptrend. Successful trading then occurs when this formation breaks, allowing you to enter into a long position at or near the final bottom or short position at or near the final top while using either Fibonacci levels, Gann swings, climactic reversals, support and resistance, or critical psychological levels to find the ideal exit point.
In general, copying trades from other traders will not always yield successful trades because many factors involved in the market are unknown and uncontrollable by you. However, putting your faith in a fully automated system will allow you to take advantage of proven trading strategies while getting on with other aspects of your life. Familiarize yourself with the techniques of improving your decision making abilities to improve your trading.