Market Signal is a means by which market participants create a volatile market that can help point investors to opportunities.
What is Market Signal?
When we talk about market signals, we are talking about the unintentional or passive transmission of information or guidance between market participants. For example, if a firm issues bonds, it indirectly indicates that it needs capital and wants to maintain control.
Through signaling, market participants essentially form a volatile market that helps point investors to opportunities and signal them if they disappear. It’s important to remember that not all companies enter the market in a static environment.
There is also what is called a trade signal, which can be seen as a trigger to buy or sell a security based on predetermined criteria. These signals can also be used to reconfigure a portfolio as well as to change sector allocations or to take new positions. Traders can create trading signals based on a variety of criteria, from simple ones such as earnings reports and volume spikes to complex signals derived from existing signals.