5 Critical Success Factors For A Winning Forex Trading System

5 Critical Success Factors For A Winning Forex Trading System

Chitika   Januari 25, 2017

To help avoid the losses from hastily diving into forex trading, it is imperative that a trader have a reliable forex trading system to help them. There are many vendors selling forex trading system and many retail traders are at a lost of which ones to select. There are basically 5 important factors to consider when selecting a winning forex trading system.

When it comes to forex trading, retail traders are often unprepared for what lies ahead and many end up losing their first account. Then they either give up, or they take a step back and do a little more research and open a demo account to practice. 

Those who do this practice on demo account will often eventually open another live account, and experience a little more success , either breaking even or turning a profit. To help avoid the losses from hastily diving into forex trading, it is imperative that a trader have a reliable forex trading system to help them. There are many vendors selling forex trading system and many retail traders are at a lost of which ones to select. There are basically 5 important factors to consider when selecting a winning forex trading system:

1. The risk reward ratio - this is a pretty simple method and almost self-explanatory. A good ratio to use when involved in Forex trading is 1:2. In other words for every dollar that you risk your looking to get two dollars back in return. If you do anything less you're setting yourself up for failure as you would have to have successful trades over half the time. This method allows you the luxury of breaking even with a 33% success ratio.

2. The win loss ratio - this method is to be used in conjunction with the risk reward ratio. Your goal is that you'd want to produce profit for at least the same amount trades that you are producing loser. Going with anything more would mean that your risk reward would have to be higher.

3. Drawdown - this is based on the amount of losses that would consecutively occur. In most cases you should not saying any more than three, but if you have a higher risk reward ratio, this number could be greater and still not affect your overall situation.

4. Past performance - if you're going to get a good forex trading system, you're going to have to look into the past performances of the system. If you know that the trading system has done well over saying the past 10 years, you can buy with confidence.

5. Average trade drawdown - this may not be a necessity for all forex trading systems but it is still useful. It is the ability to evaluate how long a trade will go down and die before it makes a turn to move to profitability.

A good forex trading system that does not need to involve expensive software. It is actually quite easy to get a grasp of. Have a basic set of trading rules and use the candlestick format on your chart as you make note of profits and losses and entries and exits. Doing this will enable you to see if your system is profitable in the long run.

As you go through this process, you will find a forex trading system that you are comfortable with and have the confidence that it will produce profit. What you do this you need to have the discipline to stay within your system so you can create the same situations that you did while testing it out. By this time, you should have a good feel for how it works and be able to apply it successfully.

Taking these few pieces of advice will enable you to pick a forex trading system that will work for you. If you are still unsure about how all this works, feel free to contact me and I will get back to you as soon as I possibly can.

Forex Trading Strategy Building and Planning

Forex Trading Strategy Building and Planning

Chitika   Januari 01, 2017

When starting to trade Forex, the trader must build first his own forex trading strategy. This is important especially for beginner traders. The forex trading strategy is considered like a plan that identifies how the trading will go. This includes identifying the analytical ways the trader will use to know the currency pair trend. It also identifies how the money in the trading account will be managed. Here are considered general steps to build your forex trading system.

1. Identify your time frame: each currency pair can be monitored over certain time intervals. The time interval can be in the range of minutes, hours, days, weeks, or months. When mentoring over a time interval of one minute for example, the value of the currency pair is monitored every one minute and displayed on the graph as an opened value and closed value for every minute on the forex trading chart.

The opened value is the value of the currency pair at the beginning of the time interval while the closed value is the value of the currency pair at the end of the time interval. What interval length is chosen depends on the trader personality and his external conditions. It also depends on the amount of money in his forex trading account. Many traders can be busy and cannot look at charts very frequently. This makes the minute or the hour intervals difficult to use. Also it depends according to the personality where some traders can be bored looking at the chart very frequently while others can be happy looking at the charts every hour or every two hours.

The most important thing when determining the interval value to monitor the currency pair over is the amount of money in your trading account. Longer interval times such as days and weeks will result in more fluctuations in the currency pair and more floating losses. This means that larger-valued accounts must use the larger time intervals. Forex trading accounts that have less money must use smaller time interval in order to be able to withstand the fluctuations in the currency pair chosen.

2. Identify your analytical techniques: in forex trading, currency pair trend prediction is the key to be successful in forex. If you are well able to predict where the currency pair will go in the future, you will be able to earn money.

There are two basic ways to use: fundamental analysis and techniqual analysis. Fundamental analysis means to track economic news of the countries that own the currency your are trading and use the news your are reading or hearing to measure the economy of that country. This way is suited for long term trades or trades that uses large time interval such as weeks or months.

On the other hand, techniqual analysis uses the charts directly to predict the trend of the currency pair you are trading. Every forex trading chart supplies you with huge tools that allow you to read the chart more intelligently.  These tools can be studied in any forex contexts but the most common are the moving averages, the pivot point analysis, the MACD, the stochastic indicator, and the RSI indicator.

In analytical analysis, you just identify two or three tools from the tools mentioned above and add them to the chart. This will allow you to study the chart and know the currency pair trend. When choosing the analytical tools, you must not use too many tools because this will make the analysis complicated. Only two or three tools are sufficient.

Second, the analytical methods which will be used during forex trading must be planned carefully. This step is considered the most important one in the forex trading strategy.  It can be fundamental or techniqual schemes. The techniqual analysis depends on analyzing the curve of the currency pair price which will be traded. It uses techniqual schemes in order to predict the price movement in the future based on the history of the price. The most popular schemes are simple moving average, exponential moving average, stochastic, Relative Strength Index, MACD, and pivot point trading. The fundamental analysis depends on economical news analysis

Third, money management planning must be considered as part of the forex trading strategy. What meant by money management is to determine the percentage of the forex account which will be traded, the profit limit, stop limit, and risk to reward ratio. This is very important in the forex trading strategy although it is ignored by many people.

Fourth, the entry and exit points must be determined according to the analysis used in trading the forex. This means to determine when to enter a trade and when to exit. This will deepens on the techniqual analysis used in studying the pair. For example, if pivot point is used as a trading strategy, the entry point may be the pivot line and the exit point may be the first resistance level.

Once the trader determined the four above points, then the forex trading strategy is built. An important thing to do after building it is to follow it carefully and respect the rules inside the forex e trading strategy.