A lot of people search for the perfect forex trading system, but how can you judge which will be the best? It seems that either you have to test it for months using a demo account, or you have to risk real money without really knowing if the system will work for you. Isn't there a more ideal alternative?
The issue is often knowing where to begin. There are tons of possibilities out there. There are free online trading systems or paid trading system, like the Forex Rebellion trading method, those in books or ebooks that you pay for (Forex Mobster), and automated forex trading systems (Forex Cash Detective) in the form of expert advisors and other software. Whatever you intend to use, you should try to ensure that it contains these three factors.
1. Trend System
Most of the best forex trading systems will be focused on following trends, whether it be medium or long term. Obviously this is not the only way of profiting from forex but for a new forex trader it is the best way to go because it does not involve you in high stress situations or a big time commitment. You do not have to star at charts all day. You can spend your time on learning more about the market.
2. Simple and clear
If you are new to forex trading, look for a system that is simple to understand. It does not have to be complex to be profitable. There are multiple forex indicators but you should not have to check all of them for every trade or you will become overwhelmed. Three indicators should be the most to begin with.
It is also important that the guidelines are clearly defined. There should be no room for error about when to place an order, position size, where the stop goes and when to close a profitable trade. It is of the utmost importance that you have a clear trading plan and that you stay with it no matter what. If there is anything left to chance you will be left to make decisions that will not always work out well.
3. Profitablitlity
There is no way every trade that you place to be a winner. Your plan is to have overall profits. This means that a trading method must be tested over a period of time, so that you know what can be expected from the system.
You can often see published results for a system but you will still need to test for yourself any method that you plan to use and one way is to use back testing. Back testing simply means looking at past charts of price movements, applying the system and verifying what would have happened. This can be an effective way of testing and is much quicker than using it on a demo account to see results. With back testing you can scroll through charts for a whole week in a short time period.
Keep in mind, back testing is not a good basis for developing a system, because you may only end up with something that works for the particular set of price movements that you were looking at. However, it is fine for testing a system that is already developed. Just keep in mind that future results may not follow the same patterns as in the past, and using a forex trading method in real time can be very different from analyzing historical charts.
