Definition

A trading signal is a trigger to buy or to sell a financial asset, produced by analysis. First of all, traders need to analyze market conditions to predict where the price will go. They use technical and fundamental analysis to do this. If you rely on news and economic releases, you use the fundamental analysis. Otherwise, if you base on technical levels and chart patterns, you use the technical one. The best you can do is to apply both of them.

Examples

To make it clear, look at following examples. Tesla published the earnings report that turned out better than analysts expected. It’s a trading signal to buy because it means that the Tesla stock price will rise soon on the positive data. Let’s look at another case, a moving average (MA) with a smaller period crosses a MA with a bigger period bottom up. This is a trading signal to buy too.

Traders use many different indicators from simple to more complex ones to identify a trading signal. Follow our trading signals every day!