Forex Trading Systems - Getting the Right One

By: Harold Hsu

Many new traders look for the 'best' and 'most effective' trading system to purchase without realizing that there's no such thing. However, a trading system can be an effective medium to learn more about the Forex market. Good systems provide a benchmark with which inexperienced traders can observe market movements.

In this article, I will discuss the important factors to consider when choosing a trading system to adopt.

Don't Choose Complex Systems

Many traders make the mistake of assuming that a complicated system will necessarily provide them with better returns. This is rarely the case, especially when the traders don't understand how each of the system indicators complement each other.

Retail traders are almost always better off working with a simple, straight-forward trading system. The important thing is to understand how it works, and also its weaknesses. Is the system better suited for trending markets, or ranging markets?

A thorough understanding of a simple trading system will help you much more than a shallow, superficial grasp of a complex one.

Look For Actual Trading Track Records

There are many (what I like to call) 'scam trading systems' that use back-tested or simulated trading results to promote its sales. Unfortunately, many ignorant people buy into these marketing gimmicks and spend good money in purchasing a useless thing.

At the very least, good trading systems will have records of past actual trades that include both profitable and unprofitable trades. Avoid websites selling trading systems that claim to not have a single losing trade... it's simply too good to be true.

Pay Attention To Track Record Losses

A trading system with 90% winning trades is useless when the losses are large enough. If you win $1 nine times out of ten and lose $10 one time out of ten, you'll still come out a net loser.

That's why it's important to pay attention to the largest draw-downs of every trading system that you're considering of using.

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