The great successful men and women of the world have used their imaginations..
they think ahead and create their mental picture, and they go to work materializing that picture in all its details, filling in here, adding a little there, altering this a bit and that a bit, but steadily building.
Robert Collier
When one has finished building one's house, one suddenly realizes that in the process one has learned something that one really needed to know in the worst way - before one began.
Frederick Neitzsche
Nothing can stop the man or woman with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude.
Thomas Jefferson
We are going to take a look at trading systems.
You may wish to develop your own system or you may prefer to purchase one that has already been developed for use and has a proven track record, or you may wish to receive a free copy of our tried and tested forex trading system by clicking the link at the bottom of this page.
First we will look at developing your own trading system.
In it's simplest form, a trading system is any set of rules that must be conformed to when trading, so we could for example lay down the following rules.
If the 5 period moving average crosses up over the 13 period moving average enter a long trade.
If the 5 period moving average crosses down over the 13 period moving average enter a short trade.
Of course this would not be nearly enough to produce a successful system, so now we need to enter some safeguards.
If the 5 period moving average crosses up over the 13 period moving average enter a long trade and immediately place a stop loss order at 50 pips below the entry value.
If the 5 period moving average crosses down over the 13 period moving average enter a short trade and immediately place a stop loss order at 50 pips above the entry value.
Now so far we have only one criterea for trade entry and this may lead to many false signals. To prevent this we might well add one or more instruments as a filter, but bear in mind that the more filters, the less trades will be signalled and although this can be a good thing, it can also be "over done"
So continuing with our system building process, we might choose to add MACD.
If the 5 period moving average crosses up over the 13 period moving average AND MACD is rising above the signal line enter a long trade and immediately place a stop loss order at 50 pips below the entry value.
If the 5 period moving average crosses down over the 13 period moving average AND MACD is falling below the signal line enter a short trade and immediately place a stop loss order at 50 pips above the entry value.
It will be necessary to back test on various time frames to establish the optimum time frame or time frames for the system. Back testing can be carried out by using a backtesting program or by visually looking back at the charts and identifying the points at which "your system" conformed to the trade entry rules and then looking forward to see if the trade would have been successful.
Next you need to develop a rule for exiting the trade. There are many ways to do this. A reliable exit method is in many ways more important than the entry. One popular method is to use a trailing stop and to continue to trail the trade until the trade is eventually "stopped out"
No system, no matter how good, will produce a winning trade for every entry. You are looking to establish a system that is successful more than 50% of the time. The higher the percentage the better the system will be.
If your system checks out favourably when back testing you may now proceed to trade it in REAL-TIME but using a DEMO ACCOUNT only.
It is most important at this stage not to put any real money at risk, because back testing is not reliable enough to prove a trading system's worth.
If after a reasonable amount of REAL-TIME testing the system shows a consistent winning average that is above 50% then you can consider making further adjustments to improve the average.
Each time that you make an adjustment, it is most important to go through the whole testing process again from the begining, to ensure that the adjustment made a favourable difference. There is no short cut to this process.
Make sure to only make changes one at a time and carry out the whole testing process for each change. If you make more than one change at a time, you will never be certain which of the changes were beneficial and which were not.
Finally, after all of your testing has been carried out and you are ready to fund a live account, you need to apply a system of money management. This needs to be a rigid set of rules that might for example include - Never trade using more than 2-3% of your trading account on any one trade - and so on.
If the prospect of developing your own trading system from scratch is something you would rather not do on your own, we would be happy to send you a copy of our own registered trading system. It is a complete and reliable system, but you are free to devolop it further should you wish.
To obtain a free copy of our trading system please click the link below. In the subject field enter "system request" & in the body enter your full name.
FOREX TRADING SYSTEM
IMPORTANT RISK DISCLOSURE
Off-exchange foreign currency trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with off-exchange foreign currency trading and seek advice from an independent financial advisor if you have any doubts.
