subject: Simplify Your Forex Trade With A Forex Trading System [print this page] A forex trading system is a set of factors that predict the changes in the price of a currency. Forex is not a gamble where going with a gut and just taking guesses is enough. One needs a system, taking as many parameters into consideration, so that the trades involve minimum risk. A trading system makes the most of your trading account and gives you consistent gains. It defines the entry and exit points and the time duration for holding a trade.
Having a trading system brings a systematic approach to trading and helps you take profits and losses. It brings order to frantic patterns of trading and puts a ceiling on the losses at where one can take them without too much damage to their account. It greatly reduces the trading stress and brings stability to your trading account.
To decide on a forex strategy that implements your trading system one must first clearly define their mission statement and goal of their forex trade. Depending on what your aim is one can develop a trading system fulfilling the objectives of your goal. Trading systems can be classified as one of the following type or a combination of both.
Technical Trading Systems
Based on technical analysis this system depends on technical trading indicators and various charting methods. The price changes on the charts and the figures supplied by the trading indicators become the factors that determine the parameters for this system. Technical analysis tools are placed on charts and indicators are combined and studied carefully. This trading system can be made use of in both range bound environment or trend environment of the market. It is relatively easier to use, inexpensive (free indicators are easily available) and very accurate about entry and exit points. The only scenario this forex strategy will fall short of is in case where unpredictable instability factors coming into play, such as war, natural calamity, and political instability, etc.
Fundamental Trading Systems
Based on fundamental analysis this system depends on the release of economic reports of various countries. The data supplied by the reports (e.g. FOMC minutes, non pay farm rolls) become the factors that determine the parameters for this system. These systems focus primarily on the demand for a currency, which is the driving force behind the price of the currency in the market. Economic reports bring about the demand of the currency and their predictive ability is very usually very accurate .These systems suffer losses when reports are unexpectedly different from what they were expected to be and the fact that these reports are sometimes not released on time.
Forex trading system is designed to make you practice good trading habits and the skills that are vital to surviving in the forex market. They bring order to chaos and help you trade with a relaxed mind.
by: Alvi Erine
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