How to Read a Forex Signal: Entry, Stop Loss and Take Profit
A forex signal is five numbers. This guide walks through the entry, the stop loss and the three take profit levels.
Rayner8 min readUpdated 22 September 2026A forex signal is not a tip and it is not a prediction. It is a set of instructions with five numbers in it, and once you can read those five numbers you can act on any signal from any provider.
This page walks through each number, what it commits you to, and the two checks worth running before you place the order.
A forex signal names the instrument, the direction, an entry price, a stop loss and one or more take profit levels. Read those five numbers and you can act on any signal from any provider without asking a question about it.
The five numbers in every signal
Here is a complete signal as it appears on this site. Nothing is left out and nothing is held back behind a form.
| Field | Example | What it commits you to |
|---|---|---|
| Instrument | XAUUSD | The market being traded. Gold against the US dollar. |
| Direction | Buy | You profit if price rises. A Sell profits if price falls. |
| Entry | 2 318.40 | The price the position is opened at. |
| Stop loss | 2 306.90 | The price at which the position closes for a loss. |
| Take profit 1 | 2 329.00 | The first target, where part of the position comes off. |
| Take profit 2 | 2 341.50 | The second target. |
| Take profit 3 | 2 358.20 | The runner, left to work if the move continues. |
Read left to right that is one sentence: buy gold at 2 318.40, close it for a loss at 2 306.90, and take profit in three stages on the way up.
The distance from the entry down to the stop. Every position sizing decision on this trade starts from that one figure.
Entry, the price the trade starts at
The entry is the price at which the position is opened. There are two kinds and it matters which one you are looking at.
A limit entry
The signal names a price that is not where the market is trading right now, and you place a pending order to wait for it. If price never reaches that level the trade never opens, which costs you nothing.
A market entry
The signal says at market, or gives a price with a note that the trade is already live. Here you take whatever the current price is, which may be a few pips from the number on the page.
Brokers differ by a small amount on every instrument, and the spread sits between the buy price and the sell price. A gap of a few pips is normal. A gap of thirty pips is not, and means the signal has already moved on.
Stop loss, where the idea is wrong
The stop loss is the price at which the trade closes automatically for a loss. It is not a suggestion and it is not a target to be moved when price approaches it.
Its real job is to mark the point at which the reasoning behind the trade has been proven wrong. If a buy was taken because price held a support level, the stop sits below that level, because price trading through it means the idea was wrong.
Widening a stop because price is approaching it turns a small planned loss into an unplanned large one. Almost every blown retail account has this in its history.
Take profit, and why there are three
A single target forces one decision: either the whole position closes there, or none of it does. Three staged targets let you bank part of the move and leave the rest to run.
- 01Take profit 1Close roughly a third. The trade has now paid for part of its own risk.
- 02Take profit 2Close another third and move the stop up to the entry price. From here the trade cannot lose.
- 03Take profit 3Let the last third run. If it never gets there the stop at entry closes it flat, not at a loss.
Risk to reward, the number that decides everything
Risk to reward compares the distance from entry to stop against the distance from entry to target. On the gold example the risk is 11.50 dollars, so the picture changes completely depending on which target you run to.
| Level | Distance from entry | Risk to reward |
|---|---|---|
| Take profit 1 | 10.60 | 1 : 0.92 |
| Take profit 2 | 23.10 | 1 : 2.01 |
| Take profit 3 | 39.80 | 1 : 3.46 |
This is why a win rate on its own tells you almost nothing. A trader who is right forty percent of the time at 1 : 3 makes money comfortably. A trader who is right seventy percent of the time at 1 : 0.4 loses it.
Reading a signal that is already hours old
Every signal here carries the date it was published, and that date is information, not decoration. Price does not wait.
Before taking an older signal, compare live price against the published entry and stop. If price has already travelled most of the way to the first target, the reward left has shrunk while the distance to the stop has not. The risk to reward you would be accepting is not the one that was published.
If price has moved more than a third of the way from the entry to the first target, the trade is no longer the one on the page. Either wait for a pullback to the published entry, or leave it.
Position size, the step most people skip
The five numbers tell you where to get in and where to get out. They do not tell you how much to trade, because that depends on your account and nobody else’s.
- Pick the loss you can accept on this trade. One percent of the account is the usual starting point.
- Take the stop distance from the signal, in pips or in dollars per unit.
- Divide the first by the second to get the position size.
Our lot size calculator does the arithmetic, and the pip value calculator gives you the per pip figure it needs.
Common mistakes when following signals
- Check live price against the published entry before ordering
- Set the stop loss in the same action that opens the trade
- Size the position from the stop distance, not the balance
- Record the result, winner or loser, so you have your own record
- Entering late at market because the trade is already running
- Skipping the stop loss and planning to watch the screen instead
- Increasing the lot size to recover the previous loss
- Moving the stop further away when price approaches it
Keep reading
- Free forex signals what you get and what to watch for
- Lot size calculator size a position from your stop distance
- Pip value calculator what one pip is worth on your account
Frequently Asked Questions
What do entry, SL and TP mean in a forex signal?
Entry is the price the trade is opened at. SL is the stop loss, the price at which it closes for a loss. TP is take profit, the price at which it closes for a gain. Most signals carry more than one TP so the position can be closed in stages.
Can I take a forex signal without a stop loss?
You can place the order, but you should not. The stop loss is what turns an idea into a trade with a known maximum loss. Without one there is no position size calculation possible.
Which take profit should I use if I only want one?
Take profit 1 for the highest chance of the trade closing green, take profit 3 for the largest result. Take profit 2 is the usual compromise, and it is where most traders move the stop to the entry price.
What is a good risk to reward ratio?
Anything at or above 1 : 2 gives you room to be wrong more often than you are right and still make money. Below 1 : 1 the trade needs a high win rate to survive.
How long is a forex signal valid for?
Until price reaches the entry, reaches the stop, or moves far enough that the setup no longer exists. Judge it by comparing live price against the published levels, not by the clock.
Why does my broker show a different price to the signal?
Every broker quotes its own price and adds its own spread, so small differences are normal. A large one usually means time has passed and the market has moved.
Do I need to follow every signal published?
No, and it is a mistake to try. Take the instruments you understand and the setups you can size properly.
