How to read a forex signal, step by step

The parts of a signal

Take the example: Buy EUR/USD · 1H · Trend pullback · Entry 1.0842 · Stop 1.0808 · TP1 1.0879 · TP2 1.0921 · TP3 1.0965.

• Instrument and direction. EUR/USD, long. You profit if the euro strengthens against the dollar.
• Timeframe. 1H, which tells you the expected holding period is hours to a day or two, not weeks.
• Setup type. Trend pullback: the idea is that an existing uptrend has retraced and is resuming. This is the part that makes the signal a lesson rather than an instruction.
• Entry. 1.0842, the price the idea is built around.
• Stop. 1.0808, the price at which the idea is wrong. Not a suggestion, a definition.
• Targets. Three of them, so you can scale out rather than make one all-or-nothing choice.

Step 1 and 2: distances and ratio

Risk: 1.0842 − 1.0808 = 0.0034 = 34 pips.

Reward: TP1 is 1.0879 − 1.0842 = 37 pips. TP2 is 79 pips. TP3 is 123 pips.

Ratios: 1.09:1 at TP1, 2.32:1 at TP2, 3.62:1 at TP3.

The ratio is the first filter. A break-even win rate of 1 ÷ (1 + R) means TP1 alone needs better than 48% to be worthwhile, while running to TP3 needs only 22%. That is not an argument for always targeting TP3 (the further target is hit less often) but it is the trade-off you are choosing between, and choosing it before you enter is the point.

Step 3: size the position

This is the step that matters most and gets skipped most.

1. Money at risk: $10,000 × 1% = $100.
2. Stop distance: 34 pips.
3. Pip value: EUR/USD in a USD account is $10 per pip per standard lot.
4. Position: $100 ÷ (34 × $10) = 0.294 lots, rounded down to 0.29.

At 0.29 lots each pip is $2.90, so the stop costs $98.60. Just under the $100 limit, because rounding always goes down.

The reason this matters: if the next signal has a 90-pip stop, the same $100 risk gives 0.11 lots. Both trades cost you the same if they fail. Without this step the wide-stop trade costs three times as much, and your equity curve stops reflecting the quality of your decisions. Use the position size calculator every time.

Step 4: place it, or skip it

Check the entry against your own chart first. Your broker's feed differs from every other, and more importantly price may already have moved. If EUR/USD is at 1.0855 when you look, entering there means a 47-pip stop and a 24-pip reward to TP1. A ratio of 0.5:1, which is a completely different and much worse trade than the one you evaluated.

The options are: enter at market only if the ratio still works, set a limit order at the published entry and let it come to you, or skip it. Skipping is free and there is another signal tomorrow. Chasing is the most reliably expensive habit in retail trading.

Managing the trade

Decide the plan before you enter, because deciding afterwards means deciding while the position is moving.

Option A, single target. Take the whole position off at TP1 or TP2. Simple, higher win rate, lower average win.

Option B, scale out. Close a third at TP1 and move the stop to breakeven. The remainder is then a free option on TP2 and TP3: the worst case is a scratch, and the best case is a much larger winner. This is what three targets are for.

Two rules that are not negotiable. Never widen a stop. The moment you move it further away you have abandoned the trade you sized. Never add to a loser unless it was a planned scaled entry from the start. Improvised averaging down is how a small loss becomes an account event.

MarketPro tracks the signal for you regardless: each level hit marks the signal and fires a push notification, so you do not have to watch a chart to know where it stands.