A sign, usually based on technical indicators, that it is a good time to buy or sell a particular security. Trade signals come in a variety of forms, including bull or bear pennants, rectangles, triangles and wedges, as well as head-and-shoulders chart patterns. Trade signals may also bring attention to abnormal volumes, options activity and short interest.
Trade signals can also be combined with fundamental analysis to give investors another weapon in their stock trading arsenal. In volatile markets and/or with high-beta stocks, using trade signals can be invaluable to investors – not only to point out promising opportunities as they appear, but also to signal when they may disappear.