When you design a trading system, or you are looking to buy an automatic robot on the market, you must make decisions according to your preferences. The first thing you should ask yourself is: what am I looking for? It … Read more. The trading strategy that we present below is a system based on the crossover of 4 exponential moving averages EMA of 5, 10, 20 and 50 periods.

In this sense, it is no different from other similar strategies, but includes … Read more. In this article we are going to explain a trading system based on Fibonacci retracements and the weighted moving average WMA , which can be used in any market and in most time frames.

Therefore, it requires a basic knowledge of … Read more. There are certain facts that have remained strong in recent years in connection with trading. Experienced and successful traders point out that, despite being able to develop trading strategies with high probability of success that allow them to enter the … Read more. Certainly the approaches to trade in the financial markets are numerous and varied. Many traders base their strategies on the fundamentals of supply and demand while others use more technical tools such as moving averages, price oscillators and other.

In this article we study … Read more. In Forex trading we have at our disposal all kinds of trading tools and strategies, with which we can take advantage of the available capital and obtain a better return.

In this article we are going to explain a trading … Read more. You will be following a specific currency pair and becoming familiar with the movements of this pair within the market.

The research can be based on fundamental or technical analysis and is based around the type of trades you are aiming to execute in that market. Build a Successful Forex Trading Plan. You can see that we are already dividing the types of traders into two camps already.

The ones that like to base their trades on fundamental factors and economic indicators and the ones that use charts for technical analysis. When I actually took the time to learn more about it and had an expert show me how it all worked I became hooked and now the charts are a key part to my system.

Part of a successful strategy is being able to exit your trades at the right time in any circumstances. In fact you will find that one of the key principles of a successful forex trading system is that it is more important where you exit the trade that where you enter it.

To explain the exit strategy a bit further you need to remember that many people agonise for long periods of time about when the exact right entry position should be that they often miss a number of key trades they could have made. Defining and executing the right exit position is the difference between a winning trade and a losing one.

Think about that for a minute — if you exit at the right time you will more often than not allow your winning trades to get maximum value at also cut short your losing trades. And that is another one of the key principles — let your winners run and get out of losing positions quickly.

Far too many people hang on to a losing position just hoping it will turn around. In fact they will sometimes increase their position in the vain hope that when it does turn they will gain more.

Unfortunately they more often than not end up losing way more than if they had just cut and run and then got into a new trade. One other area that sets winning systems aside is how they handle risk.

Here I am referring to the how you factor in the upside of a trade to the potential downside. You need to be looking at a return of at least two times your possible loss, even better if possible.

The key here is ensuring you manage your stop loss strategy correctly. Also called "Expectancy" of profit per trade. Math Behind The Best Forex Trading System. ie Wins half the time and makes twice as much as the losing trades. Say Average win size is pips, Average loss is pips. Final expectation of profit over a time period is 50 pips profit per trade on average. Which means after say 60 trades, our expectation of profit would be pips. Average win is pips as in the example above. Average loss is four times less, that is 50 pips.

Opportunity to achieve expectancy very important. Another factor to consider when evaluating a forex trading system is that of "opportunity to achieve expectancy". So far our two example forex trading systems analyzed above have come out equal as to expected profits. Both show a 50 pips profit per trade expectancy. Which one of the above systems is better will be determined by the one that has the largest frequency of trades.

Remember we can expect 50 pips average per trade over the long term. Say the second forex trading system gave us opportunity to trade two times each day, that would mean we would be looking at average weekly profits of pips. Other Factors with Different Trading Styles. Also bear in mind another trading style or strategy could have emphasis on another part of the mathematical formula.

For example a forex trading system may have a high win rate due to close profit target. Say take profit after 15 pips with stop loss of 15 pips. If it has 20 trades per day it could be a good system.

It would produce net profit of pips per day. Lets put the figures into our formula;. Example of a bad currency trading system. So you want to quickly check out a forex trading system that you think is too good to be true.

We now see many small profits and occasional huge losses. This is our alarm bell most of the profits can be wiped out by letting some losing trades get out of control. This shows that the currency trading system can be profitable as long as the overall market is co-operating to recover these wild losses. But the thing is what if the market does not co-operate and keeps going against you. That means a huge potential loss that you may not be able to recover from.

When you see this type of relationship of many small profits compared to infrequent LARGE losses it shows the system is holding on to the losing positions in the hope of a turnaround.

Personally I would not want to trade such as system. Example of a REAL winning trading system. I have attached a real trading account from a large forex broker whom provides trading account history of the best performing accounts for the month which they automatically enter as a trading competition.

Click here to see trading statement. That is the secret to this persons forex trading system! Take a look at his winning and losing trades;. We can see that this person has taken the approach of sacrificing their winning hit rate in order to keep any losing trades to a minimum. For larger accounts 7.

Many new traders are drawn to find a forex trading system with a high accuracy rate. Hence, many promoters pander to this desire and would have you believe that the most important criteria for the best trading system is its hit rate. Finding out the real answers as to what makes a great trading system is simple once we consider some of the mathematical principles behind them.

There are some good currency trading systems on the market that cannot be successfully traded by everyone due to many different reasons ranging from failure to follow the rules of the system to failure to use appropriate money management. Correct position size. Refer guidance on Money Management click here.

On the other hand, there are many more bad currency trading systems out in the market place that will bring about a speedier demise for those that try to trade with them. The discussion below will help you to identify two things. First, help identify what a good forex trading system is.

The second is to help identify what is the best forex trading system that fits you. There are many new advanced currency trading systems coming onto the market daily so having a good understanding as to how to find the best one without buying and trying them all will save you time and money.

The first principle to a successful trading system is identified by Van K. Tharp in his book entitled "Trade Your Way To Financial Freedom" In his research he studied 50 successful traders to try and find out what they were doing. Van was looking for something that they all had in common. After he interviewed the 50 he discovered these traders all had 50 different methods of trading. One of the major key's to their success was that they all had "low-risk trading ideas". This tells us that searching for the perfect holy grail indicator to tell us when to buy and when to sell is not needed to be successful in trading the financial markets.

Success is found in the MATHS of a trading method. Refer Trading Psychology click here. Lets get down to the maths of finding the best forex trading system.

We can calculate the Expected Average profit per trade that the system should produce in the future. Once again we have another curve ball thrown at us! What do you mean? Well, what if a system has been designed around a previous trending market and the market now goes into a period of consolidation? Unless our system designers have built two trading strategies into the system the mathematics may not work out as anticipated.

Assuming our forex trading system can cope with this possibility we can in effect calculate the formula for the probability of success. Also called "Expectancy" of profit per trade. Math Behind The Best Forex Trading System. ie Wins half the time and makes twice as much as the losing trades.

Say Average win size is pips, Average loss is pips. Final expectation of profit over a time period is 50 pips profit per trade on average. Which means after say 60 trades, our expectation of profit would be pips. Average win is pips as in the example above. Average loss is four times less, that is 50 pips.

Opportunity to achieve expectancy very important. Another factor to consider when evaluating a forex trading system is that of "opportunity to achieve expectancy". So far our two example forex trading systems analyzed above have come out equal as to expected profits.

Both show a 50 pips profit per trade expectancy. Which one of the above systems is better will be determined by the one that has the largest frequency of trades. Remember we can expect 50 pips average per trade over the long term. Say the second forex trading system gave us opportunity to trade two times each day, that would mean we would be looking at average weekly profits of pips.

Other Factors with Different Trading Styles. Also bear in mind another trading style or strategy could have emphasis on another part of the mathematical formula. For example a forex trading system may have a high win rate due to close profit target. Say take profit after 15 pips with stop loss of 15 pips. If it has 20 trades per day it could be a good system. It would produce net profit of pips per day. Lets put the figures into our formula;. Example of a bad currency trading system.

So you want to quickly check out a forex trading system that you think is too good to be true. We now see many small profits and occasional huge losses. This is our alarm bell most of the profits can be wiped out by letting some losing trades get out of control.

This shows that the currency trading system can be profitable as long as the overall market is co-operating to recover these wild losses. But the thing is what if the market does not co-operate and keeps going against you.

That means a huge potential loss that you may not be able to recover from. When you see this type of relationship of many small profits compared to infrequent LARGE losses it shows the system is holding on to the losing positions in the hope of a turnaround. Personally I would not want to trade such as system. Example of a REAL winning trading system. I have attached a real trading account from a large forex broker whom provides trading account history of the best performing accounts for the month which they automatically enter as a trading competition.

Click here to see trading statement. That is the secret to this persons forex trading system! Take a look at his winning and losing trades;. We can see that this person has taken the approach of sacrificing their winning hit rate in order to keep any losing trades to a minimum.

For larger accounts 7. refer importance of money management - click here. To review actual system results for the Automated Trading Championships. Find out what made the top three forex robot systems so good, here. When you evaluate a forex trading system, the first thing to look for is small losses in comparison to the size of the profits.

This is a sign that the forex trading system has mathematical credibility that passes stage one of your analysis. You want to be sure that the system is not going to let unexpected market conditions cause huge losses. Losses have to be controlled closely in the forex market to keep your trading balance healthy. You should be more than willing to sacrifice the winning percentage of correct trades for reduced risk. As a "general rule" each loss should be about half as big as the potential winning profit.

The old adage of letting your profits run and cutting your losses short makes sense for anyone wanting to make money in trading any market. Back in in an interview a millionaire stock market trader "E. H Harriman" was asked the secret of his immense success. He replied, "If you want to know the secretof making money in the stock market, it is this: Kill your losses. Never let a stock run against you more than three-quarters of a point, but if it goes your way, let it run. Move your stops up behind it so that it will have room to fluctuate and move higher".

Where did Harriman learn this? He ran a brokerage firm that allowed him to study what separated successful traders from the others. It is important to note that the mathematical formula for winning trading systems can have emphasis on different parts. That means that we cannot be dogmatic about what the actual trading formula should be for success in every case. With all these different variables we also need to consider yet another - that of the Drawdown Size. Taking into account all that we have discussed another quick way to check to see if our system is good is to look at the drawdown size.

The draw down shows the maximum amount of money our system loses from its highest point before it recovers. We would like to see as low as possible the drawdown size so as to keep our trading account balance as safe as possible.

Can you trade the system as required? If the currency trading system statistics seem good, you now want to consider if you can potentially trade the system to obtain similar results. Does the system require that you stay glued to the computer screen for hours on end? Do you want to trade that way? Or Do you only want to spend 20 minutes a day trading end of day data? All these decisions need to beaddressed. Automated trading systems known as trading robots or expert advisors may assist with this.

For further information automated forex trading click here. The final step is to try and find any forex trading system reviews from prior buyers of that particular forex system to see what the general customer feedback is.

These systems can execute large number of lots in a split second and aim to be in and out the market as quickly as possible. FOREX BOSS MODE is a trend catching setup, meaning it was designed and built to get you in and out of the trend. Running a manual system involves sitting at the computer screen, looking for signals, and interpreting your results to decide what to do. A system for currency trading refers to a scheme that you would be able to make the most of to make all of the trading selections considerably simpler in your half. On this means, you will be sure that buying enormous earnings within the Forex Currency trading market is feasible. So far our two example forex trading systems analyzed above have come out equal as to expected profits.

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