Forex Systems is the force and backbone behind every trader’s plan to trading the currency markets. They provide a personal detailed strategy to execute to take profits out of the market. There are two types of approaches a trader can take to making a Forex system.
First approach a trader can take is technical analysis. Technical analysis is the idea of reading past movement of price on charts to predict the future price movements. Technical analysis also uses indicators on it’s charts that have been invented by many present and past traders for prediction of the movements price. A small example would be that a trader would execute a trade when the moving average of the past 5 days crosses over or below the moving average of the past 10 days. This is the basic of indicators but it shows how traders can use these indicators to give them a signal to make a profitable trade.
The second approach for a trader to use for their Forex system is the fundamental approach. Fundamentals in the currency market are interest rates, current news, world crisis related to that currency. It takes the broader scope of people’s psychology that place trades due to current events. A small example for this approach is if a certain country such as the United States decides to raise their interest rates to 5.50% from say 5.25%, then most all traders will buy the US dollar due to the fact they will have their money in an investment that is providing them a higher interest return. This also is a basic example but it gives you a picture on how fundamentals can influence your decision.
Forex systems get created by millions of traders, promising to give that trader the edge of the markets to make a lot of money. Most traders combine both technical analysis and fundamentals to their Forex systems to give them the most reliable system.
Steps you can take to creating a Forex trading system:
First step is to open a demo account with any broker. You do not want to lose real money testing.
Apply and test different indicators on your currency pair to find the one you are most comfortable with.
Watch how your indicators and currency pair moves when big economic news comes out. You can watch CNBC.
Understand how your currency pair you are trading moves. Watch it a preferable trading times during the day.
Record your trades and see why your winners were winners and your losers were losers.
Use basic money management. Start with only risking 2% of your entire balance.
Test! Test! Test! Until you are comfortable enough to start trading real money with your system.
Once you have developed your Forex system and have proven to yourself that it is a money maker then you are on your way to master the Forex market.
Later in date, I will upload some of my personal systems that I have used and optimized. This can help you get started in developing your own crafted system.