Forex Trading Systems
Forex trading is gaining popularity as a form of investment for many people, many of whom don’t have training or experience as short term traders. There are currently two Forex trading systems that will help you learn this exciting craft. One system is the Mechanical Trading System that works from the principle of technical analysis. Next there is the Discretionary Trading System which involves using your instinct, experience, and judgment. It is flexible because you can choose which parts to use when selecting the currencies to buy or sell. Before you pick which system you prefer, let’s look at the benefits and concerns of each them.
One of the most popular benefits of the Mechanical System is that you can mechanize it and back test whenever you need. It does have strict rules you’ll need to follow, however. But, if you want to keep your emotions in check as you do your trades, this is a great system.
The back testing feature of this system is only good if you understand what you’re doing. What that means is that you need a little training if you want to get correct information for trading forex. There are tick data services you can subscribe to that make sure you have the right data. There is a service fee involved, but often it’s well worth it.
This system also requires you to keep your technical analysis current. The equations won’t change all that fast, but market conditions will have changed frequently with in 1 or 2 years. If you continue using old equations, you’ll end up with the same results that applied when you first purchased the system.
If you just want to know when to get into or out of the market with your trades, then the Mechanical System is the best one for you.
Ok, let’s look at the other system now, the Discretionary System. This Forex trading system makes it easy to adapt to new market conditions and works well with the constant changes of the Forex market. It is a huge advantage over the Mechanical System. As you get experience using the Discretionary System, you’ll get to know how to interpret the buy and sell signals more easily. This translates into having a higher probability of profitable trades.
The Discretionary System works more with your intuition Some people have concerns that the they aren’t able to back test or automate the process. Of course, you can’t automate judgments, habits, or aha moments. If you this was possible, you would sell your system for profit instead of trade.
In early stages of trading, you expose yourself to risk because you don’t know what you need to be profitable. It takes time to get experience and develop a successful trading system. Lots have people have spent lots of time and money trying to master this facet of trading. But once you’ve got it, you’ve got it, and you can look forward to consistently getting those big checks from your broker
I hope this brief explanation of Forex Trading Systems gives you some insight as to which one you’d further like to explore. It’s best to choose the one that’s right for your personality. If you are brand new to Forex, you might find that starting with the Mechanical System is best for you until you learn some of the ins and outs of short term trading. Once you have some experience, you might try switching to the Discretionary System. There are ways to benefit from each system.
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