A Forex Trading System

The Importance of a Forex Trading System

In order to trade foreign currency effectively, it is an absolute necessity to have a forex trading system in place. This system will be some kind of framework, composed primarily of rules that include four key factors:
1. The point at which you enter a trade.
2. The point at which you exit a trade.
3. The size of your trade.
4. The markets that you will trade in.

These four points must be defined before you begin actively trading foreign currency. The system you devise should be able to consistently demonstrate the ability to make a profit before you jump in with a lot of capital. The fact is, many traders new to forex tend to open up an account and then jump in head first. They usually lose money and then give up on forex or take a step back, do some more research and jump right back in. The key, though, is to establish a trading system that can provide a degree of consistency that both your account and your emotions can stand. Until such a system is in place, you'll probably continue to lose more money than you take in.

It's a good idea to establish three different strategies and then incorporate them into your trading plan. That is, a short, medium and long term trading strategy.

Whatever trading system you devise, just know that money management is crucial to having success in the forex market. There are often fundamental factors that move currency rates rapidly in different directions in just minutes. It is important to limit your losses by always using stop-loss points and only trading when good opportunities present themselves