How To Pick a Good Forex Currency Trading System

October 24, 2009

Being able to pick the a good forex currency trading system from a bad one is a key skill every trader should master. Without being able to tell which systems are good, and which are bad, you can easily waste months of time and many thousands of dollars following a system that has no chance of success.

This short article will help you quickly identify potential forex trading systems using a very simple 4-part process.

Most systems can be quickly ignored simply because they have fatal flaws that ensure they will never work long-term. Here are the tell tale signs of a flawed system:

– Most systems don’t teach a proven system for success. Instead of giving you a step-by-step plan, they teach incomplete and often inaccurate theory that does nothing more than confuse you.

– Most systems don’t teach technical analysis. Instead they expect you to understand fundamental analysis and assume you have hours each day to spend in front of your computer waiting for the perfect time to trade.

– Most systems don’t teach you how to manage risk. They don’t show you how to use risk management strategies that compliment their trading strategy, leaving you exposed to large losses and risking your capital.

If you do nothing more than shy away from systems with those flaws you’ll already be well on your way to choosing a good system to follow.

There have been hundreds (if not thousands) of trading systems released over the last decade, some better than others, and I’ve seen my fair share of them. This experience has allowed me to create a simple 4-part system for evaluating any trading system, and I’m going to share it with you right now.

Step 1. Your trading system should give you all the steps you need to succeed and not leave anything out. It should be as “paint by numbers” as possible so you can get started quickly and not have to guess at what to do in any situation.

Step 2. The system must teach you proven technical analysis strategies that are simple to understand and easy to implement. It should also require some thought and not be completely automated.

Step 3. Your trading system should not be time consuming and should not need you to be chained to your computer all day. It should be flexible and require only a few minutes each day.

Step 4. Your trading system should teach risk management strategies that work hand-in-hand with the core strategy to protect your wealth while maximizing the potential upside.

If you follow these simple steps when evaluating a forex currency trading system and ensure the system you pick meets all the criteria you are almost guaranteed to invest in a system with a very good chance of success.

Remember in forex there will always be some element of risk, and no system is perfect, so use your own judgement along with these guidelines and you’ll greatly increase your chances of picking a winning system.