Thursday, August 18, 2011

How to Use Zignals Trading Signals

If you are a subscriber to a Zignals trading strategy there are a number of different signal categories to consider. This post will tell you how to utilise them.

Buy Signals

When a position is initiated in a stock or forex pair it is triggered after the market close. These orders are listed in the end-of-day email delivered to subscribers and strategy previewers. In the case of strategy previewers these signals are delayed. Buy Signals refer to entry signal triggers for stocks which are already 'owned' in the strategy portfolio. Because Zignals strategies do not support compounding of positions, these additional Buy Signals are ignored. In effect, the Buy Signal is a confirmation ("Confirmed") order for an existing position.

However, new subscribers to a strategy will have portfolios which don't own stocks for which Buy Signals are triggered. In such cases, Buy Signals are used to time entries in strategy portfolios of new subscribers. The "Trigger Price" is then the price at which the order is filled and the earliest "Trigger Price" available is the next market open price. The caveat to this is performance of an individual strategy subscribed-to after inception will differ from strategy performance from inception.

Entry Signals

The difference between a Buy Signal and an Entry Signal is an Entry signal is a buy trigger for a stock which is not held in a strategy portfolio. All Entry signals are "Initial" positions. Because Entry Signals are generated after the market close the earliest price point to start a position is the next market open price. So the "Trigger Price" is considered as the next market open.

Short Signals

Short signals are split into "Confirmed" and "Initial" positions. As with Buy/Entry signals, a "Confirmed" short signal are for stocks already held short in a strategy porftolio. An "Initial" signal is a new short position opened at the next market open price. A "Confirmed" signal will act as an intial signal for new subscribers to a strategy for which the stock is not held in the portfolio.

Initial Buy/Short Update Signals

After a position is initiated, the first round of Target and Stop prices are calculated off the Market Open price. This information is delivered in the end-of-day email the day after an "Initial" entry or short position is triggered. For example, if a new stock trigger is intitiated after the market close on Monday, the stock will adopt a fill price at the next day open and calculate an initial Target and Stop price from this price. This information will be delivered in the Tuesday Signals Summary email (after the market close) and appear in Portfolio Positions (it may be necessary to rearrange the column order to view these prices).

The Target price represents the price at which the stop price rolls higher for a bought position or lower for a short position. The Stop is the initial protective price at which the strategy exits the trade if the market moves against the position.

Subscribers can track the current Target and Stop for any open position in the Portfolio of a purchased strategy.

Exit Signals

When a stock or forex position is closed the trade exits. Exits can either be at the "Stop", "Profit Target" or "Trailing Stop".

An exit at a "Stop" occurs when an initial position fails to reach its initial Target. An exit at a "Trailing Stop" occurs after the position reaches at least one Target price. A "Trailing Stop" may close for a profit depending on how many times the trailing stop has rolled forward. The "Profit Target" is the ultimate goal for a trade and is triggered as soon as the price is reached.

The majority of Exit signals come in two forms; an intraday email and end-of-day confirmation email. The intraday trigger occurs when the real-time price hits either stop, trailing stop or profit target. The end-of-day confirmation trigger occurs when the closing price qualifies to hit stop, trailing stop or profit target. This is an important distinction. Strategy trades only operate off the closing price, so a successful intraday stop, trailing stop or profit target trigger which fails to meet the trigger condition at the market close will not register as a trade in the strategy.

Updated Signals

Open positions which reach their Initial or Trailing Target price are updated with a new trailing stop and target price. This continues until the Profit Target is reached.

Unacted Signals

All strategies employ a Delay Between Trades to limit whipsaw signals. The length of this day can vary from strategy to strategy, but any stock or forex pair triggering an entry before the cool-off period has expired will have a listing under 'Unacted Signals'. The length of time to the "Last Exit" is also provided.

Leave any feedback or questions in the comments section of this post.


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