Forex Trading Signal System

Filed in Online System Trading by on February 3, 2009 0 Comments • views: 407

TO TRADE OR NOT TO TRADE?

One can only imagine the emotional, mental and physical stress that traders experience each time they get to the point of making the decision of either trading or not trading. That is why it is very important for all interested individuals who would want to invest in the foreign exchange market to be familiar with the trading system.

The FOREX TRADING SYSTEM is a set of specific rules and parameters that determine entry and exit points for a given equity in the foreign exchange market. These points, that are also called signals, are often marked on a chart and used as basis before and after the execution of a trade.

There are a lot of technical analysis tools that can be used as indicators for the creation of a specific rule in the trading system that may influence the market. Moving averages, stochastic, oscillators, relative strength and Bollinger bands are some examples of technical indicators that are used to create a rule. Some rules are based on a single indicator only. But there are instances that two or more indicators are combined to form a new rule. As a whole, the combination of all these kinds of rules is the main composition of the trading system.

Since the success of the trading system depends on how effective the rules are once implemented, traders should always optimize in order to manage risk, achieve long-term stability and increase profit per trade. These are attainable by changing certain parameters in each rule.

Just like any other system, the trading system has its pros and cons. You simply have to weigh the two and find out what will work best for you as a trader.

There are three major advantages of having a trading system. One, it takes away all the emotion out of trading. It is common to traders to be emotionally attached to every transaction they take. Unfortunately, this attachment usually results to wrong decisions that they make because they let their emotions cloud their logic. Second advantage you get from having a trading system is that it saves the trader a lot of precious time.

Once the system is in place, all the trader has to do is switch all the right buttons and everything will be done for him automatically. And third, it’s easier if you let others do the trading for you. You don’t have to do everything by yourself. There are a lot of companies out there who have developed their own trading system that you can use. It’s up to you to choose.

On the other hand, here are the disadvantages of having a trading system. First, trading systems are complex and very hard to understand because there are a lot of things that a trader has to consider and evaluate at the same time. Another disadvantage is that you can only make assumptions that are realistic and are within the limits of the system.

With all the indicators and parameters given to you as basis, it somehow limits the options that are available to you. And lastly, development of the trading system can be time-consuming and may require you to give extra effort in terms of commitment and dedication just to make the system work the way you designed it to work.

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