Before we come to understanding the best FX trading system, it is important to understand what a ‘trading system’ means. An’ FX trading system’ means a set of strategies that is applied to the possible outcomes on the future movement of a certain pair. Of course, it would have been much easier if there was a formula like Einstein’s E=MC Square to give a guaranteed outcome, but unfortunately it’s not as simple. Every indicator gives a whole set of possibilities for future and then it’s the strategy that converts those possibilities into profits. The entire process of application of the indicator, reading its possibilities and then deployment of strategies is what makes a complete ‘Trading system’. The best system is the one that meets your criteria successfully and your comfort the most.
On the Internet, you find dozens of system sellers claiming to have finally produced the BEST FX TRADING SYSTEM after their years of research and blah blah.
Some of them do work. You might even be lucky to find the best one at the first go but here are a few tips which might help you decide on which one you want to buy and use.
The first tip is that the trading system should be based on an indicator easy to understand and easy to apply. Of course there is nothing like going with fundamentals where you need to just keep with the expected time of the news release, so you basically have nothing to do with the charts. You trade only when the news are released.
However, people have their own preferences and they may decide to rather stick to some technical indicator which they can use at any time of their choice. So, make sure that the system you choose, uses an easy indicator like channel or trend lines or pivot points. These indicators are easy to apply and can be used in any kind of market conditions, hence giving them a superior edge to others. The main advantage here is the comfort, the ease to use.
The second-must check point is that the system should give you a clear definition of a “started” and a “starting trend”. the best FX trading system trades with the “starting trend” as soon as emerging trend is confirmed. On the other hand, in case of a trend already started, the system should return to you the possible reversal points to it so that you can move against the trend as you are already late to catch up with the trend. So, remember, a good trading system will give you both kinds of trading possibilities, trading with the trend and trading against the trend.
A good system will also give you clear entries and clear targets for your trades. It has to also tell you clearly where to set your stop-loss if your reading was wrong. Of course, its human nature to take liberties with their analysis and with their money but a more professional approach to the markets will call for complying with all the necessary parameters as set by the trading system. No exceptions.
There also are the important factors like trade profit-potential, draw-downs and win-loss ratios. The best FX trading system will produce trades with profit potential in the ratio of 1:4 and above (i.e. the profit potential should be four times the size of the Loss potential on each trade, anything higher will only be an added bonus).
This high trade potential keeps you safe when your trading system starts producing a streak of losing trades. With this high a profit-potential, you can cover up on all your losses with only a couple of winning trades to follow, thus the advantage. A win-loss ratio in excess of 65:35 will only make the figures ecstatic.
However, there is also this important condition that the system should be able to produce not only quick-trades but also medium and long-term trades by making only slight adjustments to the reading charts. Its beneficial when you start making money and after a few days do not want to trade everyday or analyze the markets everyday. You could just apply your best FX trading system on a larger time-frame and there you have it, a trade that is three-months long.
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