There are many, many different people out there selling their
"forex secrets" or trading systems that promise to make you a
millionaire in a month. How do you sort through the overload of
information to pick the right one, without going bankrupt in the
process?
The key to consistent success in forex is to develop your own
personal trading system. Sure, someone else may be having great
success with a certain system, and decides to crank out an ebook
or a website to sell it. But because there is such a thin line
between profitability and losing it all in the forex market, it
is impossible to convey every single piece of information that
makes a system successful. Even the most detailed systems will
not have the answers to more than a small slice of the
situations you will be faced with in an average day of
trading.
So how do you go about developing a personal trading system? The
first thing is to ask yourself what kind of trader you are. How
much time do you have to spend at your computer? Are you
comfortable carrying trades overnight, over a week, or longer?
Are you prepared to leave your trades alone while you are not
monitoring the charts? Day traders and swing traders tend to
want to close all their trades before they leave the computer
for an extended amount of time to make sure all is well.
Longer-term traders leave trades open for days or weeks, and
only log on occasionally for maintenance.
If you decide that you are not comfortable leaving your trades
alone for an extended amount of time, consider yourself a day
trader. Day and swing trades tend to rely on tight stops and
technical analysis. Long-term trades rely more on fundamental
analysis and worldwide economic conditions. This is another
factor to consider - will you enter a trade based on chart
action, support and resistance bands, overbought and oversold
conditions? Or do you prefer examining larger trends in the
economic factors that will affect prices?
The most important factor in the success of any system is
testing. Constantly test and refine your system, and eventually
you will find yourself consistently in profit. Pick several
currency pairs and become a specialist in them. If you are a
swing trader, is there a time of day where a pair always seems
to move in the same way? Become aware of each currency market's
opening and closing times. Often when one or both currencies in
a pair are closed, movement will be much less volatile and more
consistent. Long-term traders should focus more on the less
popular pairs, as they are much less susceptible to short-term
spikes in price that go against the overall trend, and you won't
be stopped out as much.
Your trading style should also influence your choice of market
maker. For example, if you are a swing trader, the spread
becomes much more important to you. Choosing a market maker with
smaller spreads will be very beneficial. People who are willing
to take bigger risks should go for market makers with higher
margins, and risk-averse people ought to find the smallest
margin they can.
Does all of this mean that you should not listen to any forex
advice? Of course not. You should just be wary of anybody who
claims to have a foolproof system, especially when they are
selling it. Don't expect to follow any system to the letter and
have success. There are many systems and people out there that
have good fundamental advice, and the key to profit is to take
this advice as a basis for your own system that suits your own
needs. If you are willing to put the time and thought into your
trading, you too can save yourself being one of the 90% of
people that do not achieve success in the forex market.
About the author:
Evan Bastian is a forex trader and webmaster of
Explore Forex, a repository
of unbiased commentary and reviews on all things forex.
Futures Trading Systems -
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