Forex Currency Movement

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Trading Signals are based on the idea that buy/sell signals are generated when the price crosses above and below a trendline. Usually, this trendline is a moving average or some exponential smoothing of the prices. But, in FOREX TRM's Trading Signals this trendline (always displayed in red!) is calculated according to a proprietary algorithm. Nevertheless, the use of the red trendline conforms to customary crossover usage. Thus, when the price moves above the red trendline we have a buy signal and when the price falls below the red trendline we have a sell signal.

Notice also that the current price is displayed in the box located at the bottom of the chart. Also, the latest buy or sell price is displayed. This buy/sell price is simply the current value of the red trendline. As we will see later this value can also double as a stop loss point.

In addition to the prices and red trendline you will notice that we also display a set of the Sigma Bands. Note that these Sigma Bands are not the same Sigma Bands that appear on the FOREX TRM's Sigma Band chart. These Sigma Bands are designed to respond faster to changes in both price and momentum. The Trading Signal chart shows the position of the current price in relation to the bands. Thus, in each case, we see if the price is overbought or oversold, as defined in terms of probability.

Finally, notice that the box also contains some comments and warning messages. These messages refer to the "quality" of the buy or sell signal. We'll discuss these messages in detail later on in the FAQ.

What are the benefits of the new Trading Signals?

The new Trading Signals are designed to give frequent buy and sell signals. In addition, our new Trading Signals are designed to show where the buy/sell signal occurs within relation to the Sigma Bands and to show what is happening with momentum when the buy or sell signal occurs. This then gives us the ability to judge the quality of the buy and sell signals. After all, not every signal can be expected to result in a successful trade. However, with the ability to judge the quality of the signal the trader has a better chance of being on the winning end of a good trade and also a better chance of avoiding being on the losing end of a bad trade.

What are the differences between Signal Bands and Trading Signals?

There are two main differences between Signal Bands and Trading Signals. First, the original Signal Bands were designed to give the trader an entry point into an overbought or oversold market based on the overbought/oversold conditions indicated by the Sigma Bands chart. The new Trading Signals are more of a stand alone chart. In fact, the Sigma Bands that are displayed are not the same Sigma Bands shown on our Sigma Bands chart. They are designed to react faster to changes in the underlying prices. The trader may act on a buy or sell signal with the new chart without actually consulting the original Sigma Bands chart, although this is not advisable.

The other big difference between the two charts is the original Signal Bands attempts to give an entry point but no exit point. The new Trading Signals give both. The new Trading Signals track a buy or sell signal as it is unfolding. Once the buy or sell signal occurs the algorithm switches mode and tracks the next sell or buy signal. This process toggles back and forth indefinitely.

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