5 Tips For The Home Business-forex Trader In Selecting The Best Forex Trading System
Ever heard of the novice trader who lost his capital within a few days of trading on a system that he thought was foolproof? Sad stories of ruin and bankrupty are rife from traders who did not even know what hit them, although they had faithfully followed their trading systems!
Here are 5 main tips that will help you select a suitable forex trading system, to ensure it will be profitable to you from day one of your trading.
1. Know Yourself - Know what type of trader you are. If you are only trading on a part time basis, and cannot spend time to monitor the market, a swing trading system might be more suitable for you. However, you need to consider whether there are better financial instruments that might bring better returns than the forex market when compared to the risk, such as trading in commodities and futuresor stocks and shares, or options, especially in the light of currency volatilities. If you are a full time trader, and able to take advantage of short quick daily swings in volatility, you may like to choose a day trading system.
2. Simplicity -Keeping a trading system that is simple to use is important. The trading system might be using one, two or even three time frames at any one time, and should not be clutterred with a maze of technical indicators that take a lot of time for you to form a trading opinion or trading decision. It can be based on a single indicator or a few indicators or a combination of time and price (for the price action trader), but always easy for you to spot a possible trading signal, to confirm the signal and to allow you to take the action to give an order to trade. Do not be paralysed by too much analysis.
3. Achievable - Is the trading system over-optimised and with results that looked too good to be achievable. When you are offered a trading system with results that appear to be obtained by over-optimising some indicators such as a moving average, run! Such trading systems cannot produce the results as they are advertised to do. Essentially, you are looking at a trading system that gives a good Win/Loss ratio for past trades and is robust enough for future trades. You may want to back test or run the trading system through a forex strategy builder to make sure it does what it says it can do.
4. Compatible - Is that trading system compatible or codeable in your existing trading platform? If the trading system requires some technical indicators or an artificial intelligence component that is not present in your exisiting technical trading platform, you will require additional hardware like a separate computer and monitor apart from your existing trading platform. Are you prepared to spend more money and time to pick up additional skills to use a separate analytical tradestation or tracking system?
5. Tradeable - The best trading system is of no use to you if it is not tradeable. There are trading systems that do generate small tiny profits often, but the occasional whipsawn signal will wipe off all your gains and send you to the negative territory. Watch out for the spreads imposed by your broker as they impact on the profitability and hence the tradeability of your system.
If you consider a forex trading system using these 5 important tips, you will be be able to select a good trading system that is meant for you, and allow you to become a profitable trader from day one!
Peter Lim is a Certified Financial Planner and shares tips, secrets and techniques in trading the forex market as a way to create personal wealth for the "little guy"- the man in the street who is looking for additional source of income or as an alternative replacement income. To discover more useful tips and articles like this to help you become a successful forex trader, visit his blog 1forex-trading blogspot.com
Please Rate this Article
Click the XML Icon Above to Receive Small Business Articles Via RSS!
