Beginners

What a Trading Signal Is and How to Interpret It

Astron Team · 09/24/2026 · 6 min read

Anyone starting to study the financial markets quickly runs into the phrase trading signal. Put simply, a signal is an indication that there may be a buying or selling opportunity in a given asset, based on some technical, fundamental, or statistical criterion. The problem is not every signal carries the same weight, and following signals without understanding their origin is one of the fastest ways to lose money.

This article explains what a trading signal is, where they usually come from, the most common types, and how to critically assess a signal before deciding to use it.

Where trading signals come from

A signal can originate from quite different sources. The most common ones are generated by technical indicators applied to a price chart, like the crossover of two moving averages or the RSI (relative strength index) coming out of an extreme zone. Other signals come from fundamental analysis, like a company's quarterly earnings above expectations, or from macroeconomic events, like an interest rate decision.

There are also signals generated by third parties: analysts, trading communities, or paid services that send ready-made alerts. This type of signal demands extra attention, because you're trusting someone else's criteria without necessarily understanding the logic behind it.

The main types of signal

Technical signals

Based on price patterns and indicators. A classic example is the 9-period moving average crossing above the 21-period average, interpreted by many traders as a signal of a possible rally. Another example is the RSI below 30, traditionally associated with an oversold asset.

Fundamental signals

Come from analyzing economic or financial data, like company earnings, interest rates, inflation, or employment data. A fundamental signal usually plays out over longer time frames than a short-term technical signal.

Sentiment signals

Measure the market's collective mood, through news volume, social media, or surveys. Extremely optimistic sentiment, for example, is sometimes read as a warning sign, since euphoric markets tend to be closer to a correction.

How to assess whether a signal is reliable

Before acting on any signal, it's worth asking a few simple questions. Does the logic behind the signal make sense for the asset and the time in question? Has this type of signal's track record, on the same asset, been tested, or is it just an assumption? Is there a defined exit plan, with a stop and a target, in case the signal is wrong?

An isolated signal, with no context, has limited value. Consider a numerical example: if a technical signal had a 60% win rate over 50 tested trades, with an average gain of R$ 80 on wins and an average loss of R$ 60 on losses, the expected result per trade would be (0.60 x R$ 80) − (0.40 x R$ 60) = R$ 48 − R$ 24 = R$ 24 positive per trade, on average. Without this kind of verification, it's impossible to know whether the signal really adds value or whether the remembered wins are just the most recent ones.

• Check whether the signal's logic is compatible with the traded asset.
• Be suspicious of signals with no tracking statistics at all.
• Never trade a signal without a previously defined stop and target.
• Log the results of the signals you follow, to build your own track record.

Precautions when following third-party signals

Services that sell ready-made signals usually publicize only the wins, without showing the full history of misses. Before paying for or following any such service, ask for (or look for) a verifiable track record, preferably with the date and time of every signal sent, not just isolated screenshots of winning trades.

Regardless of the signal's origin, executing the order on a platform like Astron doesn't change the fact that responsibility for the decision to trade remains with whoever presses the button. A signal is one more piece of information, not a guarantee of results.

How to use signals in practice without blindly relying on them

Treat every signal as a starting point for your own analysis, not as a final order. Combine the signal with your personal risk management: define before trading how much you're willing to lose on that entry, regardless of how convincing the signal looks.

Over time, it's worth keeping a simple record of which types of signal you follow most and what their actual result was in your account. This habit, more than any isolated signal, is what separates trading with a method from just following loose tips — and trading, even with good signals, always involves risk of loss.