Forex Trading Systems

Forex Trading Systems

Discretionary v/s Mechanical Trading Systems:

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Are mechanical Forex trading systems really any better? Can Automated Forex systems outperform discretionary Forex systems?  Let’s find out.

Some people prefer mechanical Forex trading systems while others prefer a more discretionary approach. My personal approach lies somewhere in between. Let’s look at each of them closely:

By definition, a mechanical or manual Forex trading system provides well defined entry and exit criteria and clearly describes trade setups and execution.  Such trading systems can be quite easily transformed into automated trading systems which can aid back testing, research and analysis.

The merit of such Forex systems lies in the fact that the guesswork is taken out of equation and trader only needs to follow clearly defined set of rules.  It helps to avoid emotions coming into the way of trading and with little discipline such systems can be easily be followed. Not only that but it also helps in reducing stress factor which is a bonus.

On the negative side of mechanical Forex trading systems we got problems with changing market conditions. No set of rules can cover all market conditions and there will be times when such systems would fail miserably.  Situation could become worse if the market conditions do not change for a sustained period of time. Automated Forex systems written based on such trading methods will be unable to cope with unpredictable market conditions.

These Forex systems bring out the artistic characteristics of traders. This is where the logic gets fuzzy and experience becomes paramount in making trading decisions.  A typical discretionary Forex trading system would use chart patterns and trend lines, which by a means are not determined by exact set of rules.

Adaptability and customization are two big advantages of any discretionary trading system.  Such Forex system can easily adapt to changing market conditions and rules can easily be changed to accommodate any unforeseen market scenarios. Experience and intuition are the cornerstones of any discretionary Forex trading systems and they can never be programmed into an Automated trading system.

On the flip side, such trading systems are hard to back-test and have unstable trade results caused mainly by emotions and stress level.  Such systems require much more trading experience and higher degree of discipline.In my opinion, anyone new to Forex trading should start off with mechanical trading systems, it helps to develop discipline and gain experience. It takes time to develop feel of the market and it then becomes easier to move towards more discretionary trading systems. My current method has clear set of rules that identify potential trades, I them use my experience to narrow down and chose the ones that I see fit for the current market conditions. With more work and analysis I hope to improve over time.

What should you know about Forex Signals ?

Forex Trading for beginners: 

If you’re a beginner that just got into investing in currency, you probably don’t know yet what are the best ways to make money. Forex, or Foreign Exchange Market, is the biggest market in the world, it has the most liquidities and it’s available worldwide, not just in one single location. Since people from all over the world trade on it, the market is open 24 hours a day during the work week, making a pause only during the weekends. Forex trading is one of the most popular ways of making money.

Another name for it is FX and the market does just what it says, it allows investors and traders to exchange currencies for one another. While this is a market, there are no goods being traded here. The currencies themselves are the ones which are exchanged and the entire thing is more of a barter, not a trade. The Forex trading is done in currency pairs all the time and you’re basically using the purchasing power of one currency to get another currency. The exchange rate at the time of the trade decides just how much of the other currency you’re getting. You could trade USD for EUR, or you can use Japanese Yen to get Swiss Franks. The market gives you the possibility to sell or buy any currency in the world, as long as it’s a free currency, not a fixed one. Though there is a huge number of currencies which can be traded here, there are certain pairs of currencies which are preferred by investors, thanks to the power of the economies of the countries which issue them. The four biggest currency pairs which are traded the most on Forex are the Euro to US Dollar, the British Pound to US Dollar,  the US Dollar to Japanese Yen and the US Dollar to Swiss Franc. Most of the Forex traders like trading in juse these currencies, to keep things simple. There are some though, which will analyze the market and will adapt, using whatever currency gives them the better chance at a nice profit.

Demand and supply is important here as with any other type of trading and since companies from all over the world need other currencies for their importing or exporting, they end up buying or selling currency at all hours during the day or night, depending on the timezone that they’re in. It doesn’t matter what time zone you’re in, you can trade on the Forex market non-stop, for five days a week. The only time when the Forex market closes is during the weekends.

The Forex market is the biggest one in the world and there is an astonishing number of trades being done on it every single day. This market is actually around 30 times bigger than the biggest financial markets. There is a huge number of trades being done and since you can trade with so many different investors, you will always find a good deal. Investors find the Forex market quite attractive and for good reason. This market can make you rich or it can make you lose a lot of money, depending on how good you are and how you can predict the trends of the exchange rates.

Besides the many opportunities, the Forex market has some advantages for investors, which other tools of trading don’t offer. One example would be that on Stop orders there isn’t any slippage when the Forex market is open.

If you’re looking to get started with Forex trading, you should pick a forex trading platform which is available online. You can use these online systems to help you get started, as they come with helpful tutorials and trading alerts which should make your job easier.

Strategies

As a beginner you need to decide what strategy you want to follow. Are you the type of investor which invests with a long term goal or do you want to get your money out as quickly as possible? Short or long term, is a decision you should make, depending on the money you have, your temperament and any other factors which might be unique to you. Both methods can be very profitable, so it’s up to you to decide which one will work best for you and your personality.

 Source:  http://www.tradingforex.net/forex-trading-basics

What should you know about Forex Signals ?

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