The traders greatest trading tool is the system or strategy he adopts daily to traverse this multifaceted market. The trading system simply tells him when to enter the market (Buy and Sell a currency pair). The buy and sell opportunities are regarded as trading signals. They represents the principles of which automated trading soft wares popularly called FX Robots works. There are many articles that sells Forex trading system or Robots, but have not seen many that teach you on how you can create and develop your own trading system that will help you capture the moves in the market.
GOALS OF YOUR TRADING SYSTEM
Two important goals to achieve when developing your trading system, they are:
1. Your system should be able to identify trends as early as possible.
2. Your system should also be able to avoid you from whipsaws (false signals).
If you can accomplish these two goals, I guarantee you will be successful. The only hard part of those goals is that they can contradict each other. If you have a system in which its sole purpose is to catch trade signals early, then you will probably get faked-outs (false signals). If you have a system which its sole purpose is to avoid false signals, then you will be late to so many profitable trades. Always remember these two goals when you create your trading system.
HOW TO SET UP A TRADING SYSTEM.
Choosing your system time frame is the first thing you need to decide when creating your system is what kind of trader you are. Are you a day trader or a swing trader? Do you like looking at charts every day, every week, every month or even every year? This will help you determine which time frame you will use to trade.
Find indicators that will help you to identify a new trend so that you could know what market to go for wither it's a buy or sell signals. Moving averages are one of the most popular indicators used by traders to identify a trend. MACD ( moving Average Convergence Divergence ) is a perfect example of an indicator using the moving average crossover system for spotting trade leads or signals.
DEFINE YOUR RISK.
It is very important that you define how much you are willing to lose on each trade. You have to decide how much room is enough to give your trade some breathing space, but professionally, your risk exposure per trade should be adjusted within 1-3%. It should never exceed 3%.
HOW TO TEST YOUR SYSTEM.
The fastest way to test your system is to go to the market chart that accompanied the trading plat form your broker gave you to access the brokerage. Trade your new system live on a demo account for at least one month. This will give you a feel for how you can trade your system when the market is moving.
For a successful forex trading, visit http://www.forexreviewhub.com Article Source: http://EzineArticles.com/?expert=Austin_Brian |
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