Evaluating Forex Trading Systems
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There are literally thousands of forex trading systems on the market, but which ones really work? Considering the fact that the vast majority of forex traders will lose money and quit, let's take a look at some of the types of forex trading systems.
There are systems known as "black box" which leave zero discretion to the trader. For example you may get a green light that goes on and then you buy or a red light and sell. These are aimed for traders who don't want to be responsible for making decisions and/or have weak discipline.
At the other end of the scale you have systems which are completely discretional where the trader makes trades based on what they see. This may work well for experienced traders who have been watching the charts for 10 years and see the same patterns happening over and over but it would not work for beginners.
Regardless of where your system is on this scale there are always extra things to consider like fundamentals. If there is a news release while you are in a trade, you may be shocked to see that you are stopped out in a few seonds after a spike.
Not many systems take this into consideration, however some will tell you to watch the forex news calendar and avoid trading during important news releases.
It is also possible that you are evaluating forex trading systems which peform well for one or two years and then lose the next year. This is a real challenge, as the saying goes past performance does not guarantee future returns.
Many traders will use automatic backtesting software to test their systems going back several years but sometimes the data they are using is not accurate or cannot adjust for times when the market moves so fast you would not be able to enter the trade, or if your broker has increased the spreads due to a news release.
There are so many things to consider that it requires an education just to be able to properly evaluate a forex trading system. As a beginner it is usually very costly to pay for high priced systems, lose your capital and repeat the cycle.
Another factor which is most important is discipline. You may find a trading system that works reasonably well but then find out that you are not following the rules. Instead of waiting for the correct signal you may jump in on a whim. You must have a system that works consistently year after year and the discipline to follow it correctly. |
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Author Resource:-
Thousands of traders have learned how to succeed with forex thanks to Peter Bain. Visit his site to begin learning forex.
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By :
Alex Harper
Submitted
2010-09-22 08:20:11 |
Article From Article Mayhem
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