What is a Forex Trading System? A forex trading system is a set of rules designed to ensure that you trade in an unbiased and emotionally free manner. Most beginner traders will seek to learn a Forex trading system, while more experienced traders will eventually turn to building their own trading system.
A good forex trading system should cover and cover all possible events that the market may experience. In this regard, they should include the following rules:
1. Which currency pairs to trade.
2. When to enter and exit trades.
3. Where to set stop loss and take profit ratio.
Forex trading systems must always be tested against historical data (called backtesting). Novice traders looking to buy a Forex trading system should always ensure that the system is properly backtested and the results are real. There are now certain software packages that automate backtesting of trading systems.
Which Forex Trading System to Choose?
It will depend on your trading style. Some traders are swing traders who want to hold their positions for days, weeks or even months. Others prefer the day trading approach and will trade in and out on the same day. A typical swing trading system takes larger swings of 100-300 pips over a few days or weeks. On the other hand, the intraday forex system looks for smaller opportunities of 25-50 pips.
Forex scalping systems are also very popular recently. Scalping is a style of trading that makes a profit with very small price changes, usually shortly after a trade is entered and made profitable. This is a strategy that doesn’t want to capture 50+ pip moves; instead, it’s more about looking at price and trading in and out in quick 5 pip moves, adding up little by little.
While this may sound risky, it can be a fairly low-risk strategy if executed properly. As with all trading systems, the most important parameter that must be addressed here is money management. It is imperative to clearly outline how much equity is at risk for each trade, with strict exit strategies and rules in place.