Thursday, October 1, 2009

An Introduction to Forex Trading Systems

Anyone who has ever looked into the possibility of trading the forex markets, will no doubt have come across the term "forex trading system". But what exactly is a forex trading system? Who actually uses these systems and why? How do they work? Are specific systems used by different types of traders?
A forex trading system is basically some kind of automated system that generates buy and sell signals for trading the forex markets. Some of these systems will actually place your orders into the market and execute them on your behalf, whereas others will just generate the trading signals and leave the execution side of things up to you.
Forex trading systems can be found in various places, but generally there are two alternative routes you can follow. Both options have their advantages and disadvantages. Going down the first route will give you free software and electronic access direct to the market, whereas the second route will generally give you more flexibility in how and where you trade.
Generally, you will configure your own trading outlook and risk profile and then choose from a range of technical and statistical indicators (e.g. weighted moving averages etc) to determine how you wish to trade. For example, if you are more interested in forex day trading, you would set a short-term outlook and define your risk profile by where you place your stop-loss orders.
Is it possible to make substantial profits using a forex trading system? Absolutely! If you plan to use one, do your research first, back-test the system and "paper-trade" with dummy positions before you start using it for real. And our number one piece of advice? NEVER risk more money than you can comfortably afford to lose. Any forex trading system is only as good as the trader using it!

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