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How to devise a good forex trading system

To make good profits in forex trading you must learn how to do things yourself, and not copy other people’s trading systems. Copying the systems adopted by other traders might get you profits in the short term, but it will not help you find out what is good for your business. Consequently in the long run you might not do well. That is why it is important to devise a good forex trading system. Remember, when we talk of forex trading systems, we are generally referring to systems that are created out of technical analysis. This is an important point, and at no stage should you confuse it with trading strategy.

The quantum of business generated in forex markets far exceeds that of stock markets anywhere in the world. To profit from such great liquidity in forex markets, you must develop your own unique system of trading. Of course you can get financial advisers to help you along but ultimately only you could determine the contours of the best forex business that suits you.

Why should you be using a trading system?

One of the reasons is that trading systems eliminate guesswork. For example it could tell you how much to risk per trade, and when to get in or out of a trade.
Another important reason is that trading systems are verifiable. What does this mean? For example you could run that system on historical data and see how it would have performed in the past. So if you have sufficient insight on technical analysis, it could help you figure out how the system would work for you in the then prevalent market conditions.

Buy a readymade forex trading system

You could buy forex trading systems from the market. When you start looking around for a viable Forex trading system, you will find that there are so many options out there that you may not be sure where to begin with. Some of these trading systems would tell you which currency pair to deal in, while others might predict the right entry and exit points of a currency trade. Forex systems greatly vary in content, and the type of system you could buy from the market depends largely on the company offering such service. Search for Forex forums in search engines, and then join some of these forums. You will soon get an idea of Forex trading systems that have a good reputation. No doubt this would be of immense help to you in purchasing an appropriate trading system.

But the key point is you got to be independent, and so you must develop your own system no matter what help you take from other sources. That is the only way you could achieve success in forex trading. In a system that is developed entirely by you, you could fit in your personal preferences and needs which are not possible otherwise.

Here are the main characteristics of a successful forex trading system.

  1. A great forex trading system is always likely to be simple in context. There will be fewer rules to follow and you will find it easy to handle.
  2. A successful forex trading system cuts down losses as quickly as possible. This is important. The system should prevent you from making further losses. So getting you out of a trade the moment it turns bad is very important.
  3. A successful forex trading system follows long term trends. It doesn’t help if you are making small profits. A system that will help you focus on long term trends will naturally help you to make greater profits.

How do you build a profitable forex trading system? Here are five easy steps.

  1. Keep your system as simple as possible. Incorporate only important rules. Nevertheless put in place a good investment management system.
  2. Your system must look for long term trends preferably on a weekly basis. Then in order to time your entry into the market, shift to daily charts. That way you can analyze the market thoroughly before entering it.
  3. Incorporate in your system the breakout method of trading forex. That is an ideal way to trade forex currencies.
  4. Your system must look out for any break out and mark it on your chart. This must be confirmed by stochastic crossed with bearish divergence. Irrespective of whether you enter a certain deal or not this would be a great timing tool for you.

Time management must be a key facet of your system. You should design a trading system that is time efficient and which has the potential to realize good profits. On the whole your system must be very simple to follow.

In effect you have two choices in choosing a trading system that suits your style. You can create your own system or you can buy a trading system created by someone else. Whichever route you take would naturally depend on your skills and your budget.

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