What exactly is a signal?
A trading signal is a clear recommendation: buy or sell an asset at a specific price, with protection levels (stop-loss) and targets (take-profit). Signals circulate on Telegram, forums or trader groups. But knowing how to read them is a skill in its own right.
A well-structured signal always contains the same elements: the direction (BUY or SELL), the currency pair (e.g. EURUSD), the entry price, the stop-loss and one or more take-profits. Without this data, you cannot assess risk or calculate your position size.
Anatomy of a signal
Here is a typical example of a signal received on Telegram:
Entry: the entrance fee
The entry price is the level at which you open your position. It can be an instant order (market) or a pending order (limit/stop). If the current price is close to the entry, you can enter immediately. If the market is far away, you wait or you pass.
Stop-Loss (SL): your shield
The stop-loss is the level where you accept to lose. It is your shield against unpredictable market movements. A good SL is placed at a technical level (support, resistance, structure) and not at an arbitrary distance. If you risk 50 pips, the SL is 50 pips from the entry.
Take-Profit (TP): your objectives
Most signals offer several take-profit levels (TP1, TP2, TP3). Each TP corresponds to a part of your position to close. TP1 secures quick wins, TP2 and TP3 aim for larger profits but with lower probability. Knowing how to divide your position between the TP is an art.
How to assess the quality of a signal
- The risk/reward ratio should be at least 1:1, ideally 1:2 or more
- The SL must be placed on a consistent technical level
- TP must be realistic in relation to current volatility
- The signal must specify the pair and direction unambiguously
With Signal Sizer, once you understand the signal, all you have to do is paste it into the application. It automatically extracts the levels, calculates the optimal batch and divides your positions between the different TP.
