Signals for Assets

There is a different range of trading signals for assets available which are appropriate for each asset category. It is important to learn more about what they do in order to improve your results as you implement your trading strategy.

Market Signals

For any asset category, it is important to understand how sensitive its value can be to movements in the market. Historically, if an asset has been quick to react to the release of new economic data, it may be a signal of how it may react in the future. If for example, a trader recognizes that the value of the S&P 500 index has changed course following the release of key US economic indicators, such as the unemployment rate, this should be taken into consideration when attempting to determine the asset’s price movement if similar data is released in the future.

Price/Value Trending Signals

It is also important to learn how prices move within a given period of time. The values of many assets appear to move in cycles and by observing the value over time, you can identify whether there are any trends related to changes in the asset’s value. For example, the S&P 500 is largely influenced by the performance of its components i.e. the 500 largest US stocks. Since these components are publicly traded corporations they report results on a quarterly basis. If you are trading on the S&P 500 and you notice that there is a spike in its value a week before these releases, it may be a signal for a price/value trend for this asset.

Timing Signals

Since many markets are traded within a pre-defined set of trading hours, signals can exist as certain timeframes approach. For example, with the S&P 500 asset you may notice that the index has shown its biggest gains in the first 30 minutes of trading for the past few trading days. This signal could help you decide whether a call or put option is appropriate depending on when you place the trade and its expiration time.

Keeping in tune with the appropriate signals will teach you more about your chosen asset’s performance and improve your overall trading results. Here are some useful observations relating to signals in each asset category.

Index Signals

Index signals tend to be oriented to short term investors although position traders may take a longer view. Generally, traders look for quick movements so the transaction length typically varies between 1 to 5 days.

Stocks Signals

With stocks it is important to analyze company fundamentals and sector situation in order to identify tendency depth. Graphs will help to determine the exact moment to take bullish or bearish positions in the company which usually will take longer to play out with wider movements, so the average length of the trades will be over 15 days.

Forex Signals

Forex is the most traded market in the world and volatility is usually very high, so the safest option is looking for quick movements. Transactions are usually opened and closed on the same day although swing traders will take longer term positions with wider stops.

Commodities Signals

These signals don’t appear very often, but when they show they generate high profitability because of their tendency movements. At certain moments the volatility of commodities can be excessive and movements are very erratic. For example, the oil market which reacts instantly to unexpected news events.