Forex Trading System and Rules to Understand

WHAT IS FOREX TRADING SYSTEM AND BEST 6 RULES

TO UNDERSTAND ABOUT THAT

FOREX TRADING SYSTEM

What is FOREX SYSTEM TRADING

A method of trading Forex that is based on a series of analyses to determine whether to buy or sell a currency pair at a given time. Forex system trading could be based on a set of signals derived from technical analysis charting tools or fundamental news-based events. The day trader's currency trading system is usually made up of technical signals that create a buy or sell decision when they point in a direction that has historically led to a profitable trade.

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Rule of Forex Trading System

Step 1: Examine Your Mindset

(A) Know who you are: When trading the markets, your first priority is to take a look at yourself and note your own personality traits.

(B) Match your personality to your trading: Be sure that you are comfortable with the type of trading conditions you will experience in different time frames.

(C) Be prepared: Plan your trade so you can trade your plan. Preparation is the mental dry run of your potential trades - a kind of dress rehearsal.







Step 1: Examine Your Mindset

D) Be objective: Do not become emotionally involved in your trade. It does not matter whether you are wrong or right.

(E) Be disciplined: This means that you have to know when to buy and sell. Base your decisions on your pre-planned strategy and stick to it

(F) Be patient: When it comes to trading, patience truly is a virtue

Have realistic expectations: This means that you won't lose your focus on reality and miraculously expect to turn $1,000 into $1 million 10 trades







Step 2: Identify Your Mission and Set Your Goals

(A) With anything in life, if you don't know where you are going, any road will take you there.

(B) Next, you must start to understand how much you need to earn in a trade and how often you will have to trade to achieve your goals. Don't forget to factor in losing trades.







Step 3: Ensure You Have Enough Money

(A) Cash is the fuel needed to start trading and without enough cash, your trading will be hampered by a lack of liquidity

(B) Cash cannot come from sources that you need for other important events in your life, such as your savings plan for your children's college education. Cash in trading accounts is "risk" money.







Step 4: Select a Market That Trades Harmoniously

(A) Pick a currency pair and test it over different time frames. Start with the weekly charts, then proceed to daily, four-hour, two-hour, one-hour, 30-minute, 10-minute and five-minute charts

(B) Set up support and resistance levels in different time frames to see if any of these levels cluster together.

(C) Remember, passion is key to trading. The repeated testing of your set-ups requires that you love what you are doing.

(D) Once you have a currency pair that you feel comfortable with, start reading the news and the comments regarding the particular pair you have selected.







Step 5: Test Your Methodology for Positive Results

(A) This step is probably what most traders really think of as the most important part of trading: A system that enters and exits trades that are only profitable.

(B) Having said the above, it is necessary to pick a methodology and implement it many times in different time frames and markets to measure its success rate.

(C) Personally, I like to use a system that has the highest reward to risk, which means that I tend to look for turning points at support and resistance levels because these are the points where it is easiest to identify and quantify the risk.

(D) Once you have designed your system, it is important to measure its expectancy or reliability in various conditions and time frames







Step 6: Measure Your Risk-to-Reward Ratios and Set Your Limits

(A) The first line in the sand to draw is where you would exit your position if the market goes against you

(B) Calculate the number of pips your stop is away from your entry point.

(C) Calculate the percentage your stop loss would be as a percentage of your trading capital.

(D) Now draw a line on your chart where you would want to take profit. Be sure this is at least 40 pips away from your entry point.

(E) If you get knocked out on your first attempt, don't despair. Often it is your second entry that will be correct.







Sources and Forums

http://www.investopedia.com/terms/forex/f/forex-system-trading.asp

http://www.investopedia.com/articles/forex/10/making-a-rule-based-trading-system.asp

http://www.forexfactory.com/forumdisplay.php?f=71

http://forums.babypips.com/free-forex-trading-systems/

































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Forex Trading System and Rules to Understand