Crypto signals have gained immense popularity in the last few years. The reason isn’t farfetched: they save traders the stress of scouring the market in search of trading opportunities and keeping up with the immense options in the market (especially in a trending market). As crypto signals have grown in popularity, so as the controversies they have courted. The experiences that traders have had with signals vary, depending on the source of information.
In this article, we will be taking a close look at crypto signals, what they are, how they work and the upsides and downsides that accompany them.
What are Signals in Crypto?
Crypto signals are trade suggestions, ideas, notifications, or recommendations from crypto analysts or professional traders to buy or sell a crypto asset at a particular price. Crypto signals also incorporate certain information like entry price, take-profit, and stop-loss targets. Crypto signals are the result of technical analysis carried out by analysts or experienced traders. The accuracy of a trading signal usually depends on a number of factors such as the source of the information and the long-term outlook of the strategy.
Crypto signals are traditionally sent out from a social media group to members informing them on what assets to buy, the entry price to get into the trade, and profit targets to exit the trade. They also include a contingency plan in the form of a stop-loss target in case the trade doesn’t go as intended.
Crypto signals are meant to be high-probability trade ideas that have been researched and analyzed by analysts or traders before being posted on the forum. Signals can also be generated by computer software that performs price analysis using an algorithmic formula. Crypto signals come in both free and paid forms as well as in manual and automated forms.
How do Cryptocurrency Signals Work?
In the complex and volatile world of crypto trading, you need to have some knowledge and/or experience with cryptocurrencies and trading to get off on the right foot. If you are starting out with no experience and little knowledge of how financial markets are traded or how cryptocurrencies work, then trading signals can get you off to a good start.
Crypto signals are the product of price analysis carried out by a trader, analyst, or computer software and sent out to members of a forum or subscribers to a signal service in the form of instructions on what tokens to buy, what price to buy at, what price to sell at, and what level to minimize loss in the event that the trade doesn’t go as planned.
These instructions or recommendations are conveyed through several media such as email or postings on a social media forum. Crypto signals can be beneficial to both beginner and experienced traders alike. The efficiency of a signal service usually depends on the analytical depth of the source of the signal service, the long-term outlook of the strategy, and the risk management skills of the subscribers of a signal service.
Pros of Crypto Signals
Easy to use
One of the biggest upsides of subscribing to a crypto signal service is the fact that they are easy to use. All you have to do is wait for instructions to be posted on the forum or sent to you via email and implement them based on your preferences.
With crypto signals, you don’t have to engage in the intense scouring and complex analysis required to find trading opportunities and execute them, saving you time in the process. This can be a good opportunity for those getting started with crypto trading who don’t know how to find trading opportunities as well as for experienced traders who have to deal with multiple opportunities.
Can be profitable
If the signals are put forth by a source with strong analytical skills and a robust understanding of the market, then the signal service has the potential of being profitable barring extreme market conditions.
Cons of Crypto Signals
The potential to lose money from the wrong analysis
The profit prospects of a crypto signal service depend on the analytical knowledge of the source of the signal service and the depth and breadth of their market knowledge. Without strong analytical skills and a robust understanding of the market, the source will put out wrong signals that can lead to failed trades.
The risk of buying into a subpar strategy
Every signal service has a strategy it is based on. If the strategy doesn’t have good long-term prospects, you will find yourself with a long string of losing trades.
Diana is the CTO of Vestinda.
She’s an engineer with extensive experience in the payments space, passionate about mathematics and artificial intelligence.