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what are trading signals
Educational
September 12, 2020

Signals in Crypto Trading

Shubham GoyalProduct Specialist

Cryptocurrencies and the blockchain are well on their way for mass adoption globally. Cryptocurrencies have become an incredibly alluring group of assets to invest in. As with every financial instrument, there are signals generated manually by professional traders and bots programmed to research and predict market movement. 

For the uninitiated, signals are trade suggestions and ideas with several components – including details such as which coins to buy, what price to buy them for, and even optimal positions for the different coins. The use of signals has become extremely popular due to the sheer number of cryptocurrencies being traded in the various exchanges. It can easily overwhelm crypto enthusiasts who are just starting out. 

That being said, even veteran crypto traders often find themselves in a position where they have to rely on the information given by the crypto signals. If you are just starting out on trading in cryptocurrencies, it is highly recommended that you understand what signals are and their different components, whether or not you put it to use.

What Are The Features Of Crypto Signals?

A crypto signal is usually created manually by professional traders with a mix of their trading experiences and the algorithms they use. This combination makes a signal a considerably powerful tool to spare the entry-level users and hobbyists from having to spend a lot of time researching their coins to invest in. 

Paid subscription models are usually found to be much more reliable than the free signals and can be found available on many platforms, including telegram channels. Keep in mind, however, that the signals cannot guarantee a profit every single time, and every single investment you make are subject to market risks, so make sure to research on these risks and get comfortable with them before engaging in trading cryptocurrencies, or any other investment for that matter.

Components of Signals

Signals, tend to follow a format, and usually consists of the following 5 components:

  1. Buy/Sell order
  2. Coin
  3. Price
  4. Take Profit / Stop Loss
  5. Additional Information

Let’s take a more in-depth look into each of the 5 components:

Buy/Sell Order

Perhaps the most important information contained in the signals, this component of a signal will indicate your position on the crypto asset mentioned. It will offer details as to whether you should buy, or sell a particular coin, or even stay neutral for the time being. 

Coin

The second component of a signal will give you information on which coin you should apply the buy/sell order. The sheer number of altcoins available on the different exchanges are overwhelming, and crypto signals help you choose the best coins to buy/sell at the moment.

Price

This component of a signal will give you the price at which you are supposed to execute the trade. Most signals will have the current market price of the coin indicated, but some signals may have them marked a bit higher or lower as the case may be. 

If the price indicated is the current market price, the trade should be executed as soon as possible, while if a future price point is mentioned, the trader should wait till the coin reaches that point for maximum benefit. 

Take Profit / Stop Loss

This segment of a crypto signal will tell you the expected profits if the things go right, or a stop-gap for losses if things go awry. Since you aren’t the one predicting the trend in the first place, it is not easy for you to determine when the trade should be closed for an optimal risk-reward ratio. This segment will tell you the price points at which you exit your position for optimum rewards.

Miscellaneous Information

In this segment, the trader may choose to add any additional notes of importance relating to the particular trades, such as tips on risk management, or to close your trade within a specific time limit. 

To Conclude

Trade signals are an effective way to get used to trading with cryptocurrencies, as most of the work is done by professional traders and algorithms. However, they are not fool-proof and are susceptible to losses once in a while. 

Make sure to be comfortable with the risks associated with crypto-trading before applying this knowledge to practical use. If you are looking to begin your crypto journey with BTC derivatives, or Litecoin Derivatives, check out the respective guides by clicking on the links. Happy Trading!

 

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