A forex signal is a ready-made trade plan. A good one tells you what to trade, which direction, where to get in, where you are wrong and where to take profit. Here is how to read one and turn it into a trade sized for your account.
The parts of a signal
EUR/USD BUY
Entry 1.0850
SL 1.0815
TP1 1.0885
TP2 1.0920
Why: pullback into prior resistance, now support, at the London open.- Pair: the instrument, here EUR/USD.
- Direction: buy (long) if the base currency is expected to rise, sell (short) if it is expected to fall.
- Entry: the price to open at. Some signals give a range or say “market” (enter now). Others use pending orders: a buy limit below the current price, a buy stop above it.
- Stop loss (SL): where the idea is proven wrong and the trade closes for a loss. Here 1.0850 − 1.0815 = 35 pips of risk.
- Take profit (TP): one or more targets. TP2 is 70 pips away, so the trade risks 35 to make 70, a 1:2 risk:reward.
- Reasoning: the context. If a provider never explains anything, you cannot judge whether a setup suits you.
Step 1: size the trade before you enter
Never pick a lot size by habit. Decide how much you will lose if the stop is hit, for example 1% of your account, and calculate the size from the stop distance:
- Account $2,000 × 1% = $20 risk.
- Stop = 35 pips. On EUR/USD a standard lot is worth about $10 a pip.
- Lot size = 20 ÷ (35 × 10) = 0.057, so round down to 0.05 lots.
Our lot size calculator does this instantly for any pair.
Step 2: check the price you can actually get
Signals take time to reach you. If price has already moved well past the entry, the risk:reward has changed. A common rule: if price has used up more than a third of the distance to TP1, skip the trade or wait for a pullback to the entry. Chasing is how a 1:2 trade becomes a 1:0.5 trade.
Also check the spread. On exotics or around news it can be several pips wide, which matters on tight stops.
Step 3: place the stop and target immediately
Enter the stop loss and take profit with the order, not after. Connections drop and phones die. A trade without a stop is the single fastest way to blow an account.
Managing the trade
Signals with several targets often suggest closing part of the position at TP1 and moving the stop to entry (“breakeven”). That locks in a result while leaving room for TP2. Follow the provider’s management updates, but never widen a stop to avoid taking a loss.
Timing and sessions
The same signal behaves differently at different times of day. A breakout at the London open has more fuel than one during the quiet late-New York hours. Each market page shows which hours are typically most active for that pair, and our market hours tool converts session times to your city.
Red flags
- No stop loss, or “SL: mental”
- Claims of 90%+ win rates with no verifiable history
- Pressure to deposit with a particular broker or to pay for a “VIP upgrade” via private message
- Results shown only as pips, never in risk-adjusted terms
Read how to spot forex signal scams for more. Signals are a tool, and your risk rules are what keep you in the game.