What Is a Forex Trading System?

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A Forex trading system can be thought of simply as a set of rules for an organized method used to trade Forex.

Forex trading systems have become extremely popular for a number of reasons. One of the most important reasons for this popularity is that fx trading systems allow you to trade in a more systematic and organized manner.

The objective of a Forex trading system should always be to allow the trader to trade profitably. In order for this to happen, of course, the FX system used must be a good one. In order for a trading system be a good one it needs to be thoroughly tested and researched to ensure it will have a good chance of producing profits when trading in the future. Often these test are performed on past Forex market data in a process called “back testing”. Back testing is done using Forex technical analysis techniques in order to find price patterns and parameters which will allow traders to anticipate future price moves.

One of the very best things about Forex trading systems is that they remove the subjectivity from your trading. By removing any subjectivity you are much less likely to trade haphazardly and therefore much less likely to make needless mistakes. Removing subjectivity from your trading also helps you to eliminate any limiting emotions which may negatively impact your trading performance. Also, the fact that good Forex trading systems have been thoroughly tested gives trader a great amount of confidence going forward. This confidence makes it much easier to trade consistently as a trader need only follow the instructions as dictated by the trading system.

In its simplest form a Forex trading system consists of an entry and exit. A simple example might be as follows:

“Buy the EURUSD if it closes above the 200 day moving average”

“Sell the EURUSD if it closes below the 200 day moving average”

Now understand that what we have just looked at is simply an example for the purposes of illustration. It is an example of a simple entry as well as a simple exit to make a basic trading system.

Forex trading systems are in use by successful individual traders and financial institutions around the world. With a good trading system you too can put yourself on the road to successful trading.

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Forex Striker – What’s Wrong with This Picture?

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I recently received an e-mail touting a new Forex robot called Forex Striker. The subject of the e-mail made an amazingly bold claim that stated, “The First USA Patented FX Robot Technology Is Here!”

Although I receive e-mails that make all sorts of claims I was still curious enough to go to the Forex Striker website just to see what the hype was about. There I saw a picture and underneath the picture there was wording to the effect of a, “government verified patent”. On the image itself there was a button that said, “click to verify”.

I clicked on the, “click to verify” button and was taken to what appeared to be a copy of a certificate of registration from the United States copyright office. Okay, that was all well and good, but I was interested in seeing the actual documentation to support the claim of, “The First USA Patented FX Robot Technology Is Here!”. I then spotted a link that said, “you can see patent here”. I clicked on the link and was taken to a document from the database of a “Copyright Catalog”. Once again that was all well and good, but I still didn’t see anything to support the claim that this technology had been patented.

After some additional searching I simply could not find any information for this supposedly revolutionary new Forex robot. As someone familiar with intellectual property and the documentation involved it does appear that Forex Striker has been registered with the US copyright office. As anyone familiar with intellectual property can tell you a copyright is not the same as a patent. In fact, even though both copyright and patent are designed to protect intellectual property they are extremely different forms of intellectual property protection.

Based upon what I’ve seen my assessment is that the claim of Forex Striker being the, “The First USA Patented FX Robot Technology Is Here!” is inaccurate as there is no patent information to be found. Now there is always the possibility that I simply could not locate the patent information as I do not claim to be an intellectual property expert. What I do know is that the patent information that is claimed leads to a page showing a copyright. The particular registration number that starts with, “TX” is a registration number from the copyright office.

In conclusion any company that claims that its product is patented when it is actually copyrighted is not a company whose product I would recommend. Whether the misrepresentation was intentional in order make the product appear more impressive or a mistake it is still a misrepresentation.

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Turn $1,000 Into $35,000 Without Risk – Really?

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Believe it or not that is actually the title of an e-mail I received trying to sell me yet another Forex trading robot. Let me ask you a quick question, if you received such an e-mail would you believe it?

Okay, let’s just say we want to give the sender of this e-mail the benefit of the doubt and consider the possibility that what they are saying is true. Turning $1000 into $35,000 is no small feat by any stretch of the imagination. I would think anyone would be proud to make 35 times their initial investment. This is amazing, but certainly not impossible, especially over the long term.

What was interesting about the title is that it states, “turn $1000 into $35,000” as if this is something that the robot will do again at some point in time in the future. I’m going on a limb here and imagine that the results are past results. One thing we all have to realize about past performance results is that they are in the past. This is important to understand because market conditions vary from year to year. I’m only mentioning that because when market conditions vary from year to year the returns on your investment will do the same. I know it would be less sensational, but it would have been more accurate to state, “this Forex robot turned $1000 into $35,000” (assuming that the statement is actually true).

In reality, it really isn’t the first part of the statement, “turn thousand dollars into $35,000 without risk” that disturbs me. It’s the last two words of the statement that are particularly disturbing…”Without Risk”. Merriam-Webster describes risk as, “possibility of loss or injury”. So based upon the definition of risk, the title the e-mail soliciting the Forex trading robot is attempting to tell us that there is no possibility of loss.

If you come as no surprise to you that I find that statement, “without risk” to the ridiculous when used in relation to anything in the investment or trading world. Unfortunately, there are many beginners who may read such an e-mail title and be drawn in by the words, “without risk”. I mean, really, in today’s economic environment who wouldn’t want to trade or invest without risk? Of course, you and I know that such statements are completely misleading. So to set the record straight for any would-be traders who might even remotely entertain the possibility that they can trade or invest without risk I would like to make the following statement: “There is no such thing as trading or investing without risk”.

So what should you do when you see a Forex trading product that is touting that you can trade it without risk? Simple, avoid it. I understand this may be difficult for some because it may be exactly what they want to hear. Simply keep in mind that no legitimate offering is going to tell you or for that matter even imply that you can trade Forex without risk.

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The Importance of Patience in Forex Trading Success

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There are number of important factors that go into making you a Forex trading success. Some of these factors include such things as a reliable Forex trading system, adequate working capital, etc.

While all of the factors mentioned above are important, I find that the importance of patience cannot be overemphasized. Why is that, you ask? If I had immediately answered that off the top of my head I would simply look at the facts. The facts show that all successful Forex traders have the patience to do what is necessary when it is necessary. Patience is a necessary part of the all important “trading discipline”.

One of the first concepts it is important for beginning Forex traders to wrap their heads around is that successful Forex trading is more like a marathon than a sprint. Regardless of the timeframe that you trade in, having a long-term outlook can help you be more successful.

So let’s look at an example of how patience may come into play in your everyday Forex trading.

When you first open your live trading account — This is a critical time for beginning Forex traders. Often times the anticipation of placing your very first trade can get the best of you. The last thing you want to do is to jump the gun and place a trade that your trading system does not dictate. In this scenario you simply have to have the patience or make yourself have the patience to wait until your trading system tells you to take action.

When your first few trades are losing trades — If your first few trades are losers, please keep in mind that this is not the end of the world by any stretch of the imagination. This simply means that your trading system did not trade profitably in that particular set of market conditions. For some, there’ll be an overwhelming desire to “do something” so that they can get their account back up to the amount of their original deposit. If you happen to feel this way don’t beat yourself up about it. It is very common amongst beginning traders. This is a time when you need to have faith in your trading system and understand that a good trading system will recover and move to higher equity.

When you are in a big drawdown — Being a larger drawdown is one of the toughest situations that the trader can face. More experienced traders realize that drawdowns are a natural part of trading. Beginning traders get more nervous and their lack of experience has yet to teach them what to expect. Don’t get me wrong, when I’m in a large drawdown I don’t jump up and down because I think drawdowns are a great thing. I do, however, understand that my trading system will recover from the drawdown and eventually move on to new equity highs. Having patience will allow you to ride out these inevitable pullbacks in your account equity. Not having patience can cause you to stop trading your successful Forex trading system and throw in the towel just before your equity would have skyrocketed.

As you can see, patience is of paramount importance in successful trading. As you gain experience in your trading you will also gain confidence and as a result of that you will be more patient as well. Simply keep in mind that successful trading is more like a marathon than a sprint and understand that you are in the Forex market for long-term success.

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Using Forex Signals – An Opportunity To Earn While You Learn

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Is it really possible to profit using Forex signals? Of course it is. Using a good Forex signal service can help you to profit from an experts years of experience and expertise. At the same time you can study Forex trading so that you can learn how to profit. In essence, you will have the best of both worlds.

So what does a Forex signal service do? A Forex signal service does the research and development of a particular Forex trading system or systems. The service then send the necessary trading information to its subscribers so that they can place the trades.

Having someone else do all the heavy lifting for you sounds like a dream come true doesn’t it? Well, it can be if and only if you have a good Forex signal service. You see, all Forex signal services are not created equal. That is because the level of expertise of those creating the Forex trading signals varies widely. The cold, hard truth of the matter is that there are many more Forex signal providers that don’t know what they are doing than there are those that know what they are doing.

Since the level of competence of Forex signal providers varies so greatly it makes perfect sense to do you homework prior to using such a service. You will definitely want to take your time and throughly investigate and service you are considering. Here are a few of the things it will be important for you to know:

Does the Forex signal provider have his own money in the system? While this is not always a dealbreaker, it can indicate the level if the signal providers faith in their own systems.

How much capital is needed to start? Subscribing to a service that requires $100,000 simply doesn’t make sense if you are planning on opening an account with $10,000

What is the system’s maximum historical drawdown?

How has the system perform on data outside of backtesting?

These are but a few questions you will need to ask in order to get a feel for whether or not the signal service may be right for you. Remember that the time you spend doing your homework

Filed Under: Forex Articles

Use A Forex Demo Account To Learn Forex Trading Fast

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Forex trading demo accounts are a great way to learn the forex market. You can sign up with any forex brokerage to get a free demo account. Almost always, the MT4 Metatrader is one of the platforms utilized to provide the service.

A Metatrader demo account puts countless expert advisors and strategies at your disposal. Because a trading demo account uses simulated funds, you can test all you want without any risk of losing money in the process. Any strategy you come up with should be demo tested for several weeks before getting into live trading.

To start a forex trading demo account, you should try to pick a broker you plan on using for live trading. This is not essential, but every brokerage offers different things, and you will become familiar with a given broker by demo trading. It will help if you understand your broker when you move into live trading.

That said, it is easy enough to set up several forex trading demo accounts to see which brokers you like best. Some brokers only offer 30 day demo accounts. Others will keep your demo account going so long as you log in regularly.

To open an account, click on demo accounts at the brokerage site. You are asked to enter your name, address, country, phone number and email address. Don’t worry, no one will be calling you.

You will be given several choices regarding the size of account you want to open. It is better to opt for a deposit close to the dollar amount you plan to trade when you go live. That way, you will be gaining more practical experience for the day you open a live account. Brokerages offer forex trading demo accounts in denominations from $3,000 or less up to $5,000,000.

Most brokerages offer mini or micro accounts for demo trading that allow you to trade fractions of lots. If you eventually plan to live trade with less than $10,000, you would be wise to acquaint yourself with the smaller accounts. Just so you know, many traders with large deposits still like to use the smaller size lots in their trading.

If you open a foreign brokerage account, you may have choices for leverage as high as 500:1. Regulations have forced allowable leverages in U.S. accounts down to100:1 and lower. 10:1 may soon be the only leverage allowed in the U.S. Even though high leverage has always enticed forex traders to risk more in pursuit of incredible gains, there is always the possibility of huge losses too. Be aware of the risks when using high leverage with foreign brokerages.

As you sign up, there always seems to be a place to check whether you want to receive their newsletters. If you do not check yes, the registration will not proceed. Some brokerages offer several choices of information you can receive free of charge.

Once you have registered for your free forex demo account, you are prompted to download the platform to your computer. Later when you add to your account expert advisors and various indicators you may acquire, there are times that the process does not run smoothly. You want the files in Program files on your C Drive, listed under the brokerage name. If necessary, you can manually insert the items with copy and paste into an expert, indicator, or template file.

Using free forex trading demo accounts will help you immensely as you build your skills in trading. You will reach your goal of forex profits faster by utilizing these very accessible free tools.

Filed Under: Forex Trading

Setting Up Your Forex Trading Charts

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Forex trading charts enable a trader to evaluate market patterns so a good trade can be entered. The three most common are line charts, bar charts, and the most popular one, candle stick charts. Charts not only plot the price against a particular time frame, but also contain volumes of historical data.

Line charts include a simple line revealing price action in time. Bar charts and candle sticks give additional information including open, close, high, and low in a given time period. Forex trading charts are basic to foreign currency trading. They are the starting point from which traders add templates, indicators, and expert advisors (EAs) to enhance their trading.

Although there are those who prefer to trade with a clean bar chart, using price action and support/resistance to formulate trades, for most traders the lure of numerous exotic indicators and EAs is great. With the click of a mouse you can begin to design your own forex trading charts. Then you can name and save them for reproducing easily on other currency pairs.

It is better to begin with one of the major pairs. When you first bring up a chart on Metatrader MT4, by default you get a l hour bar chart. You can view charts in time intervals from 1 minute, 5 minute, 15 minute, 30 minute, 1 hour, 4 hour, daily, weekly, to monthly on the most common charts. At the click of a mouse, you can navigate from one time frame to another.

When the default 1 hour bar chart comes up, the bars are green on a black background with a white grid. When you right click on the chart and then at the bottom click on properties, you are given every possible shade of color. You can customize forex trading charts to your liking. It will make trading easier if you use a combination that is easy on your eyes and colors that highlight the indicators most interesting to you.

By inserting colors that show rise and fall of price in different colors, like green for rising price and red for falling price, you can see in an moment the information you need to enter or exit a trade.

Your decision on which forex trading charts to use depends on the amount of time you can devote to trading. Day trading which utilizes the lower time frames, takes more time to watch than trading the daily charts. On the other hand, there are strategies that instruct a trader in how to spend only a few minutes at each trading day’s end to set up a trade.

You will find yourself looking at several of the higher time frames when you day trade on 15 or 30 minute charts, to determine the overall trend. There is software available to put on your chart showing the trends of 5 or 6 time frames at once. It is a big help to a trader to always know the trend of the next 2 or 3 higher time frames.

You can get a tremendous education on forex by going back on a chart to see how the market reacted at certain times.
This hands on experience will increase your ability to spot those trading patterns that most often point to a good trade.

Continually increasing your knowledge of forex trading charts can increase your profits. Because they are the foundation of all foreign currency trading, make it your aim to learn something new about them every day.

Filed Under: Forex Trading

Tips For Choosing Forex Trading Brokers

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Selecting your forex trading brokers can be a daunting task, there are so many to choose from. If you are new to trading, you will likely find that some of the brokerages recommended by old hands are not the best ones for you. They may become your best bet once you are seasoned, but when you are demo trading, different parameters apply.

As a new demo trader, you do not need five platforms and the virtual personal servers offered their big clients by many brokers.
What you do need is education and a simple platform, like Meta Trader. The MT4 platform is in the same standard form at almost every brokerage. The bells and whistles offered for your education, however, differ among brokers and are important for the new trader. Find a broker that offers a direct feed for the latest economic news and the forex calendar. Many brokers send messages with commentary on the latest news as it happens. These come straight to the screen where you are trading. Newsletters giving the day’s overview are common as well.

Another aspect to consider is how your trade is handled. If you are starting out with a small deposit many forex trading brokers use a dealing desk, meaning a human broker will place your trade.That broker may not have your best interest at heart by working against you with manipulations to increase personal commissions. There is software available like Broker Nightmare where you can input your trade and stops unseen by the broker until execution.

No matter how wonderful the customer service sounds in a broker’s promotions, test it with an email or phone call to see how fast they respond. A service oriented broker will leap at the opportunity to bring a new trader into the fold with careful service. Internet connections do go out sometimes and you can be left standing with a trade that has no stops. Find out whether you can get action quickly by phone, before the worst happens.

You will want to check the spreads, which is where most brokerages make their profit. On the major pairs, 1 or 2 points is what you look for in average market conditions. There are reputable firms that have a commission structure apart from the spread. They are known as ECN or Electronic Communication Network brokers and are also known as NDD (Non Dealing Desk) brokers. Human intervention is not supposed take place, but be aware that some brokers say they offer ECN but do not. It becomes evident to the savvy trader if this is the case. Until a few years ago, ECN was rarely available for individual traders with smaller deposits. That has changed and is a welcome feature to look for with forex trading brokers.

The location of your broker can be critical. There are reputable forex trading brokers all over the world. Ones in the UK, Switzerland, and Cyprus are some of the favored ones. Some U.S. traders are reluctant to send their money overseas where regulation may be unfamiliar to them. However, since the rules prohibiting hedging in forex accounts were implemented in May, 2009, accounts elsewhere may be more desirable. Many of these off shore brokers no longer accept U.S. clients, but there are still some very good ones. One of the reasons traders like them is for options like CFDs (Contracts For Difference) to trade oil and precious metals, not always offered by traditional U.S. brokers.

As an example, Dukascopy, a large bank and brokerage based in Switzerland, has a world of helpful platforms and education available. Until recently, a $50,000 deposit was the minimum for live trading so you only found recommendations for it from big players. They have now lowered that requirement to $100. Even though they offer Meta Trader, there are several other platforms, many of them for advanced trading, that are there to entice you. Keep in mind that forex trading is a process that takes time. Jumping into a complicated platform or trading system can be devastating to the growth of a new trader.

Be careful with the leverage offered by brokers. Dukascopy, interestingly, only offers up to 1:100. There are firms that boast a 300:1 leverage. These brokers are offering you to trade $300 for every dollar in your deposit. Seasoned traders generally recommend staying under 100:1 leverage as a new trader.

Stay away from spread betting, as enticing as it may be. Popular in the UK, the concept mimics the conventional system, but is still betting, and is illegal in the U.S.

As you progress in your knowledge and experience, options like advanced platforms, and VPS service will become more important. The right forex trading brokers can help you keep it simple as you grow in the trading business.

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Should You Use Automated Forex Trading Systems

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In order to make an educated decision about whether to choose an Automated Forex Trading System, you’ll need to know what one is. Automated Forex Trading System software is software that is designed to not only make trades for you, but to make decisions about those trades. The software is commonly referred to as a “Forex Robot” or “Forex Expert Advisor”. Sometimes it is also referred to by the abbreviation EA. Obviously you should choose software that is compatible with your broker’s system.

People generally choose a Forex Robot because it sounds easy. After all, who wouldn’t want to just put some money into a brokerage account and wait while it generates profit as they go about their everyday business. It seems like the lazy man’s answer to getting rich quick.

For starters, you should realize that you don’t have to to trade using a Forex Robot. Several of the software platforms actually require you to input your trades into your chosen online platform manually. Both large institutions, and individual traders have both been cashing in on major profits for a long time using simple manual systems.

If you are one of those people who must take a “hands-on” approach, being in touch with every step of the system you’re using, then a Forex Robot isn’t going to be a good choice. The way they make their choices is a closely guarded secret, hidden inside the software, so you will only see the system make the trade, but never know why it chose to do so. This puts the user at a disadvantage. You can’t see the logic behing the trade, and therefore you cannot evaluate that logic. You will never know if the software is forcing you to take risks to get even minimal profits that you would normally never take.

Since these systems may not meet your needs, it is vital you thoroughly check out the options before deciding to risk any real money.

The best choice you can make to maximize your chance of success in long-term trading is to learn to do it yourself. If you take the time to understand the workings of the system, you will ultimately develop a better feel and understanding of the process. This will give you a better understanding of the risks involved, and will allow you to weigh them against the prospective gains. This understanding alone will place you ahead of the competition in an environment where so many get involved hoping to make a quick buck.

Filed Under: Forex Articles
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