Signal
Family XII · Other terms
Not to be confused with trading signal.
Signal is a broad term for any discrete message or indicator output that suggests a market action, such as entering, exiting, or adjusting a position. It is informational only: a signal does not place, modify, or close an order by itself. Signals can originate from technical rules, statistical models, news events, or human analysis, and their reliability varies with the method and market conditions.
What a signal contains
A signal typically specifies an instrument, a direction, and sometimes a timeframe, price level, or size. It may be delivered as a visual marker on a chart, an alert, a text message, or an application programming interface (API) event. The content and format depend on the source; no single standard governs all signals.
- Instrument: the market or asset the signal refers to.
- Direction: buy, sell, or hold.
- Conditions: optional price, time, or volatility constraints.
Worked example: interpreting a signal
A trader receives a signal to buy 1,000 shares of a stock at 50.00 with a stop at 48.00 and a target at 54.00. The signal is not an order; the trader must decide whether to act and how to size the position.
Sources and limitations
Signals may be generated by technical indicators, quantitative models, news analytics, or discretionary analysts. Their accuracy, latency, and cost vary widely by provider and market. A signal is not a guarantee of future performance, and acting on one carries the same market risks as any other trade.
Often confused with
- trading signal
- A trading signal is a specific type of signal intended to prompt a trade, whereas a signal can be any market-related alert or indicator output; the visible sign is that a trading signal always includes an actionable buy or sell instruction.