What are crypto signals? A beginner’s guide

Crypto signals may seem daunting, and potentially dubious: how do you know they’re not a scam? Read on …

Contents

A crypto signal is rather like a horse racing tip. It could be the key to making a fortune, or it could be a false steer.

In the world of cryptocurrency, there are many ways to make money, and even more ways to lose it. But where to turn for advice? For some investors, the answer is in crypto signals: hints and guidance on trading, either paid-for or free that can, potentially, help you turn a profit on your investment.

So how do they work?

What are crypto signals?

Crypto signals, to put it incredibly simply, are suggestions from a third party about what crypto to buy or sell at a particular time. To go into it a bit deeper, they are instructions which usually have four parts. First, there is the cryptocurrency to buy. Second, there is the price to buy it for. Third, there is the price to sell it for in order to make a profit. Finally, there is a level at which the reader should get out of holding the crypto in case things go wrong – the stop-loss. 

A typical paid-for crypto signal service will charge perhaps £200/$250 a year, provide two to three signals a day and advise on when to take a profit or stop a loss. Some will make claims such as "82% success rate". This is misleading: it means users of the service are losing money on almost one in five crypto purchases. Others can be even more expensive, with fees of up to $949 a year

If you are involved in trading crypto, the chances are that you should have a pile of money dedicated to crypto trading. Often, a crypto signal will include advice on what percentage of your holdings you should invest in the crypto it is talking about. This is important, because the idea behind using a crypto trading signal is to give you the best opportunity to maximise your profits. 

Types and purposes of crypto signals

There are, ultimately, two different kinds of crypto signal: free crypto signals and paid-for. The difference between these two should be obvious. In some cases, though, a service provider will give some signals out for free as a kind of advertisement or promotion for its paid service. A google search turns up hundreds, if not thousands, of crypto signal suppliers, so do your own due diligence before you sign up to any of them. 

Either way, the idea behind using a cryptocurrency signal service is that,  in theory, it takes the pressure off trying to work out which cryptocurrencies to invest in, how much to invest in them and, perhaps as importantly, when to offload them to maximise a profit. 

Advantages of crypto signals

Why might someone use a crypto signal? Well, as we have already said, the first idea is one of convenience. If a crypto trading signal is accurate (which is, admittedly, a big if) then purely by following the commands contained in the signal, one can have some idea as to what to invest in without having to do too much work. You just do what the signal tells you and, theoretically, you should end up making a profit out of it. Of course, the same is true of following horse racing tips …

Another reason someone might use crypto trading signals is because, potentially, they can help people learn about the cryptocurrency market itself. If one were to get a signal, one could examine what it says and, when another signal comes in, compare and contrast the two. With work, over time, one could then get an understanding of trends and have a better idea as to when to buy and sell crypto. This would, ultimately, render the signals redundant, because the user would no longer need them. 

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Signals also allow people to make use of the information on when to get out of a current position as a risk mitigation tactic: if the signals are saying sell, it would seem foolish not to follow that advice. That said, all investment is, by its very nature, risky, so you will have to be careful and supplement the information found in the signals with your own research.

Crypto signals
Crypto signals sees someone else do your analysis for you - Photo: Shutterstock

Disadvantages of crypto signals

Crypto signals are not without their flaws, though. The returns on pretty much any investment you make grow the more money you put in. In the case of paid-for signals, you will be paying out anyway, so how profitable they are will depend on how much you are able to put in. This means that, in some cases, paid-for cryptocurrency signals are only really worth it if you have a lot of money to begin with. 

Second, cryptocurrency signals are never going to be always right. Forecasts for financial commodities are very often wide of the mark and, for something as volatile as crypto, this is even more true. Therefore, it follows that a crypto signal, which is, a kind of cryptocurrency prediction, can also be wrong. This means that there is the potential to lose money at someone else’s say-so, which is not only bad for your bank balance, but also bad for your own morale. This is especially true when it comes to computer-generated signals.

Third, there is also the matter of fraud. One of the big worries about getting involved in the world of cryptocurrency as a whole is the plethiora of scams that exist to rob unwary investors of their money. Crypto signals are no exception. There is always the possibility that the person or people behind a signal could take your money and either run off with it, leaving you high or dry, or they could send you information that has not been properly checked and accounted for. In the case of the latter, knowing if a signal contains accurate information does require a certain knowledge and expertise. We would suggest that the ability to fully analyse whether or not a signal’s information holds true, and to what extent it holds true, is high enough that, if you have it, you probably do not need to be using crypto trading signals to make a profit, or, at least, avoid significant losses. 

Where to find crypto signals

Both paid-for and free crypto signals can be found on Telegram and other social media platforms, and on crypto trading APIs

Final warnings

Crypto signals can, potentially, be a good way to make a profit on cryptocurrency, but they are not without their drawbacks. If you want to know how to find crypto signals, then it is best if you do your own research on the subject. Picking the first one that you come across could end up being a disaster, especially if it is a fraudulent one.

Keep in mind that many crypto signals are not all they are made up to be, so don’t believe the hype and make sure you know what you are getting into. A lot of signals are sent out on the Telegram messaging service, so be aware that the person you are dealing with may not be who they say they are.

Also, the use of algorithms mean that some signals lack the personal touch, and therefore may not be the best crypto signal for you personally. You will also have to make sure you use the exchanges named in the messages in order to maximise your potential profit. As always with anything to do with crypto, you will need to be careful. You should do your own research, remember prices can go down as well as up, and never invest more money than you can afford to lose.

FAQs

Are crypto signals worth it?

They can be. It all depends on how accurate they are, and how much money you invest as to how much of a profit you can make. There is also the potential for them being wrong, or a scam, so be careful and think before you pay for them.

How to read crypto signals

A crypto signal should have the name of the crypto, how much you should put it, what price you should buy it for, where to buy it from, and advice as to when to stop a loss or take a profit. 

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
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