Forex Trading Systems

Forex trading systems have become highly popular in recent years. It used to be that only large institutions could trade the forex market, but with new, Internet-based trading systems that allow fast, efficient executions, individuals can now take part in this highly lucrative market.

WHAT IS FOREX?
forex is short for Foreign Exchange Market, a 24-hour electronic marketplace where major currencies are traded. The most active currencies are the US Dollar, the British Pound, the Euros and the Japanese Yen.

WHY FOREX?
Aggressive traders prefer forex for several reasons:

• Forex offers up to 100 to 1 leverage and can be very profitable
• Forex is traded over 24 hours
• Traders can profit when the market moves up or down
• Some traders feel technical analysis works especially well with forex
• A successful forex trader can make 10% profits or more each month

HOW DO YOU SELECT A SYSTEM?
There are three things that I consider crucial for picking the right system. First, the system must have a proven track record. If a system vendor does not post past performance, consider that a warning sign. And even if they do post results, make certain that you understand completely how they are calculating their returns. Some system vendors simply issue buy signals and assume their traders exited the market at the high of the day. In real life, traders cannot time their trades this accurately and the real returns are much lower.

Second, you must select a system that complements your personality. If you are the type that likes to trade often, then choose a day trading system. On the other hand, if you like to focus on major moves, a swing trading system will better suit your needs.

Finally, a system should include money management techniques. At the very least, it should have clearly established rules on how much to risk, where to place stops, and where to take profits. Without a trading plan, your emotions can take over and lead you to make bad decisions.

For those of you interested in exploring different systems, I highly recommend the forex forum, forexfactory.com. Just go to the forum called "Trading Systems," and you will find hundreds of forex traders posting various systems they have come up with for trading forex. Not all systems posted here are great, but you will get many ideas by visiting and may even be inspired to create your own system.

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