What Is a Market Signal?
A market signal refers to the unintentional or passive transmission of information or indications among participants in a market.
It serves as a means of communication that provides insights into the market dynamics.
For instance, when a firm issues bonds, it indirectly conveys its need for capital and its desire to maintain control.
Timing and Opportunity in Trading
Market signals are often based on technical indicators and are used to determine the optimal timing for buying or selling a specific product.
They also draw attention to alternative options available in the market, which can lead to abnormal growth and short-term interest.
By utilizing signals, market participants contribute to the creation of a volatile market environment that helps identify investment opportunities and signals their availability.
It is important to note that not all markets operate in a static manner.
Actionable Triggers for Portfolio Management
In addition to market signals, trade signals act as triggers for buying or selling securities based on predetermined criteria.
These signals can be used to rebalance portfolios, adjust sector allocations, or initiate new positions.
Traders can generate trading signals using various criteria, ranging from simple indicators like earnings reports and volume surges to complex signals derived from existing signals.