Cryptocurrency trading signals are an effective tool for growing your crypto portfolio. They accompany beginners or seasoned traders on the crypto market, offering them the best buying or selling opportunities to make financial gains.
But is it effective? And above all, how to choose the best cryptocurrency signals? We will provide concrete answers to these questions in this detailed guide.
How are crypto signals generated?
Cryptocurrency signals are generated in two ways: automated and manual.
Automated crypto signals
Automated signals are published by trading software developed by professional traders in collaboration with developers. They rely on various technical indicators to analyze historical data on cryptocurrency price action to identify trends which they then send out as trading recommendations.
Trading with automated signals is also known as “algo trading” or automatic trading. Thus, they are generally used in short-term crypto trading.
Manual crypto signals
Manual signals are issued through analysis by professional traders. They perform technical analysis and fundamental analysis to identify trading opportunities. They then use technical indicators on charts to identify entry and exit levels for the trade recommendations they find.
These signals use fundamental analysis to trade news and/or market sentiment to uncover promising trading ideas. Unlike automated market signals, manual signals harness human intelligence and intuition.
Automated Signals vs. Manual Signals
Manual signals differ from automated signals in that they typically recommend higher profit-taking targets and, therefore, can offer better risk/reward ratios on their recommendations.
Published by seasoned, manual signals are also much more susceptible to sudden market fluctuations and strong volatility, as signal providers can re-focus profit-taking targets on trades that are doing well or manually remove signals that don’t fit their pattern, offering a chance for better profits and leeser losses.
While automated cryptocurrency signals minimize the human intervention from trades and give recommendations without any emotional attachment. They are also “backtested” to inspire greater confidence in their systems.
Unlike manual signals, automated signals can execute trades faster and offer signals on a wider range of instruments than a manual signal system.
Crypto Trading Signals: The Benefits
In the section below, we will further detail the various benefits of cryptocurrency signals.
A tool for performance
The most obvious advantage of crypto signals is their performance. Indeed, crypto signal providers often display performance and consistency that beginners can only dream of.
The main advantage of signals is that they are supposed to help you make money and improve the overall performance of your trading account if you also trade manually.
Time-saving for traders
If you want to make trading decisions on your own, you’ll need to learn about technical analysis and trading, and spend a lot of time monitoring and analyzing the markets.
By simply following cryptocurrency signals, you can take advantage of the opportunities in the cryptocurrency market without having to educate yourself or follow the markets. On the other hand, if you rely so heavily on signals, you’ll want to make sure you choose a particularly reliable provider.
Cryptocurrency signals can also be used to diversify risk. For example, if you are a stock trader and know nothing about cryptocurrencies, crypto signals will allow you to diversify with cryptocurrencies without educating yourself on the subject.
The opportunity to learn crypto trading
Finally, while it is possible to simply replicate crypto signals without question, one can also seek to understand the reasons behind each signal. In doing so, you will also learn to trade at the same time.
Indeed, by understanding trading decisions, you are bound to be able to make the same decisions on your own at some point, because you will have understood what they are based on.
Cryptocurrency signals: the disadvantages
Let’s move on to the few disadvantages of crypto signals.
There are many scams
We often hear the question, “If crypto signals work, why isn’t everyone using them? “. The answer is quite simple: There are few reliable crypto signal providers. Worse, the crypto signal market is teeming with scams of all kinds.
This means that there are many victims, and they are rightly making their displeasure known, on social networks and elsewhere. The result is that all signal providers are lumped together, and many traders are careful to stay away from any crypto signal service.
The risk of never learning to trade
Although some people use signals precisely so that they don’t have to learn to trade, this is also a shame.
Crypto trading is indeed an exciting business, and by relying 100% on crypto signals, you will never learn anything about this exciting world.
Cryptocurrency signals: reliable or not?
The reliability of trading signals is the first question asked by all traders who are interested in the subject. The truth is that it is difficult to find reliable crypto signal providers. The good news is that there are some.
But a reliable signal provider does not ensure that the signals will be reliable in their performance, even with a long and transparent history. It is possible to guarantee that a crypto signal provider is serious, works in good faith, and is not a scam, but it is impossible to guarantee that they will never cause you any losses.
There is no such thing as certainty in any financial market, and cryptocurrencies are no exception.
However, a few things can help you assess the reliability of crypto signals fairly accurately, including the longevity of the signal service. The older a service is, the more reliable it is supposed to be. The other element to consider is of course the analysis of historical performance, which should be presented in the form of a report going back as far as possible in time and providing as much detail as possible on each position taken.