How To Find The Perfect Forex Trading System.
Trading in the Forex or currency market has became extremely popular in the last few years or so. But how many traders are achieving consistent profitable results trading in the Forex market? Regrettably they are in the minority, in actual fact as little as 5% of traders are achieving regular profitable returns.
One of the major reasons of this is because numerous Forex traders are focusing on the wrong information when they are making their trading decisions and they are completely forgetting to take into consideration one of the most crucial factors of all and that is Price behavior.
Most of all the Forex trading systems that are being currently used today are constructed of technical indicators. But what are these technical indicators and how are they implemented?
All technical indicators basically consist of just a series of data points which are then plotted on a chart. These data points are calculated from a mathematical formula which is then applied to the price of any given currency pair. Put differently, it is a chart of price plotted in a different way that assists us to see other facets of price.
We will take for instance a long MA crossover signal. The price has climbed up sufficienctly enough to make the short period MA crossover the long period MA thus generating a long signal. Most traders just observetd this as “The MA crossover made the price go up,” but in reality it has happened the other way around, the MA crossover signal occurred because the price went up.
What I’m trying to say here is, that at the conclusion, price behavior dictates how an indicator will behave, and this should always be taken into consideration on any trading decision that might be made.
All trading decisions that based on technical indicators without first taking the price action into consideration will give you than less accurate results.
For instance, we shall take a look at a long signal which has been generated by a MA crossover as the market advances towards an important resistance level.
If the price suddenly has started to bounce back off that resistance level, then obviously there is no point taking any action on this signal, this is because what the price action is telling us is that the market does not want to go up. Quite often, under these circumstances, the market will continue to fall down, completely ignoring the MA crossover.
Please don’t misunderstand what I am saying here. Technical indicators are an extremely vital important part of trading. This is because they assist us see certain circumstances that can be otherwise very difficult to see, especially if we were just watching pure price action on its own.
But when it comes time to taking decisive action, price action incorporated into your Forex trading system will definitely put the odds in your favor, therefore generating more higher probability, successful trades.
So how do we create a workable Forex trading system?
The first essential thing that you need to make certain that your Forex trading system fits your trading personality; otherwise you will find it very hard to follow plus you will be dissatisfied with its results.
Almost every trader will have different needs and goals, therefore there is no system that will perfectly fit all the traders requirements . You need to do your own personal research on the various trading styles and technical indicators that are readily available. Until you eventually find a trading system that perfectly works for you and you alone.
Plus you need to make sure that you understand fully the technical indicators that you have decided to use when you are constructing your trading system.
Secondly make sure that you have incorporated price action into your new trading system. Thus you will only take long signals if the price behavior tells you that the market wants to go up, and short signals if the market gives you an indication that it will go down.
Thirdly and most important of all is that you need to have the necessary discipline to follow your Forex trading system consistently. To find some ready made Forex systems go to our Forex Section here at Asxnewbie. You could find one there that will be suitable. Or alternatively you can click on the banner on the right hand side to see if that suits you.
When you do find a system that you like then my advice is that you trial it out first on a demo account, then when you have achieved a level of confidence then progress towards a small account. And eventually when you are feeling more comfortable with your trading system and are being consistently profitable,then and only then apply your system to a regular account.
I wish you profitable trading.