Forex Currency Trading SystemWhat is the Forex Currency Trading System and how you can suceed in it! It is possible to average more than 10% per month trading currencies. |
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Forex Currency Trading SystemIn the modern world, investments are plentiful. In many countries and nations around the world, business stock is freely traded between hands. Small business relies on investment heavily; the easiest means of building funds is selling shares of the company. Bigger businesses, such as banks, create investment opportunities by offering loans to small businesses and individuals in order to create a return on their existing money. With the expanding horizon of investments with no slow down in sight, the forex market is becoming increasingly popular because of its high liquidity and 24 hour trading environment. One of the most popular methods of investing in this potentially lucrative market is by creating a hard forex currency trading system to provide a strong rate of return for your investment. The forex currency trading system is widely accepted as the base method of being a successful trader. Many currency experts would agree that a forex currency trading system with rules and a consistent return yield a greater rate of success than emotion based gut trading alone. The forex currency trading system may incorporate a technical chart based set of rules, a news based set, or any combination of the two. The only real important fact is to have a proven rate of return in a set of rules that can be easily repeated. The methodology behind creating a sound forex currency trading system can go many ways. The most common in the currency market is to build your forex currency trading system from a technical analysis standpoint (patterns in charts and graphs). Though news plays a very key role in movement of currencies along one another, price action and patterns is the base for trading in this market more than any other. When creating a chart/pattern based forex currency trading system, many traders usually take a sound position of logic behind the trade, and then begin to write the rules by applying the logic to previous prices. This is known as “backtesting”. In the example we will be using, the logic to our forex currency trading system relies on the price action theory; a set trend has the tendency to continue to trend in the current direction until something stops it’s movement and causes it to consolidate or turn the other direction. We will attempt to create a forex currency trading system that will get in our trade at the first sign of a beginning trend, and get out of the trade the moment the trend shows signs of weakness. The “indicator” we will use is what is known as a “simple moving average”. The simple moving average is created by the following formula: Moving Average = (Sum of previous ‘X’ closing prices) / X This formula is a very simple average of the past X number of prices (which can be changed to optimize the forex currency trading system when testing). When this number is calculated for every bar on your chart and the points are connected, a very nice smoothed line appears that is essentially the average of the last X number of bars. This will be the absolute base of your forex currency trading system. The larger the number plugged in for X, the smoother and straighter the line will be. By plotting two averages, in theory, a turn around in price (or trend) will cause the two average lines to cross, and signal a long or short trade. Here is a picture of a 30 minute GBP/USD chart with a 10 period SMA, and a 50 period SMA with a few signals for our forex currency trading system, circled in white: The yellow line is the faster 10 period SMA, and the aqua line is our slower 50 period SMA. We now have our basis for the beginnings of what appears to be a nice and soild forex currency trading system. The second step at this point would be to test our forex currency trading system with past data to see how well our theory stacks up against semi-real market conditions. This is most effectively done manually, but for the sake of a quick and emotionless test, this set of rules will be coded into a MetaTrader 4 expert advisor, and automatically traded on the previous 2 years worth of market data with an initial deposit of 10,000 USD. It seems that our forex currency trading system isn’t stable enough to be traded yet. Trading 0.1 lots each time, over the passed 2 years, we would be down about 40% of our account (with a 73+% rate of failure). Much optimization and a set of money management rules will need to be put into place in order to turn such a forex currency trading system profitable and worthy of trading. Though only one type of system was outlined, the basic methodology of creating a technical forex currency trading system remains typically the same. Though success stories in the forex market differ from method to method, many experts would agree that the key to steady success in the fickle world of currency trading would be a well developed forex currency trading system Risk DisclaimerThis website is for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or financial futures instrument or to participate in any particular trading strategy. The information presented on this website is for general information only. Although every attempt has been made to assure accuracy, we assume no responsibility for errors or omissions. Forex-, Stock- and Futures trading is speculative, involves a high degree of risk and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment. Performance figures shown are from a live forward test and can be considered hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there can be frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully account for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. |
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