A trade signal is a trigger for action, either to buy or sell a security or other asset, generated by analysis. That analysis can be human generated using technical indicators, or it can be generated using mathematical algorithms based on market action, possibly in combination with other market factors such as economic indicators.
KEY TAKEAWAYS
- Trading signals are triggers to buy or sell a security based on a pre-determined set of criteria.
- They can also be used to reconstitute a portfolio and shift sector allocations or take new positions.
- Traders can create trading signals using a variety of criteria, from simple ones, such as earnings reports and volume surge, to more complex signals that are derived using existing signals.