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Feb
10
Forex Trading Systems
Filed Under Forex Options Trading | Print This Post
Like any other field of study and industry, the person who has the most expertise is the one who will most likely thrive the longest and reap the greatest benefits. This same holds true with forex trading.
The trader or investor with the most experience and know-how is the one who is better positioned to take home serious wins, as opposed to the novice trader who banks all his cards on luck.
Start-up traders in the foreign currency market who just rush into the business without ample knowledge and foresight will not just lose their investment, but will also lose the money spent for initially getting into the trade.
Any professional on the foreign exchange trading field will say that all will be futile without a systematic plan.
Chances are, without a solid trading system, the individual who opts to trade might fold under pressure and end up losing so much more than he should have. You must consider not just the resources you hold and how much you are willing to risk, but also the timing of the investment and when each move should be carried out.
Forex trading, therefore, should be met with a business-like approach and with a professional system, and should not be treated as a mere hobby.
Your forex trading system template should consider the following:
What currencies will you be trading in? What are the requirements needs to enter a trade? What are needed to exit a trade with profits? How do you exit a trade with losses? How much money can you afford to risk in the transaction? and What are your capital limits?
Those who start trading without clear answers to the above questions are not likely to succeed in the long term. The absence of a set goal and defined forex trading system will only make you jump from one market to another, and prevent you from taking up expertise in a certain financial instrument.
In addition, the presence of a system will also protect you from unforeseen events, because you are likely to have already thought of a backup plan in case unfavorable instances occur. To know if the forex trading system you have mapped out is effective, ask yourself whether most of the decisions you have to make under the plan are based on subjective feelings. If they are so, then it’s time you make a change. To avoid getting too emotionally attached to your investment, you must plan your moves objectively and realistically.
Once you have a system in place, you must commit to follow your plan all the way through. Even with a solid system, you are still likely to fold if you don’t have the proper discipline to carry it through.
Remember, while currency conditions change sporadically and nobody can really accurately predict where economies go, there are ways to make informed guesses and intelligent forecasts. And because you’re dealing with your hard-earned money here, it’s better to be safe than sorry.
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Nice article. My thoughts are that you should only concentrate on 1, maybe 2 currency pairs, and get to know them inside out, as each pair has their own personality. I personally only trade the GBP/USD and USD/JPY pairs.
I also think anyone new to forex should start out trading on a longer-term basis as this is far less stressful and technical analysis is more reliable. For example, I myself look at daily and weekly charts and use the 4 hour charts to time my entries.
My own strategy is a very simple and very effective one. I use it on the H4 and D1 timeframe. Buy and sell signals are provided by two exponential averages, having 10 and 80 period, short ema(10) and long ema(80) . This is combined with a Zig Zag indicator in order to spot elliot waves. The picture speaks for itself, no need for further explanations.