Forex Trading Systems — The good, the Bad, and the Ugly
Why you need Forex Trading systems and strategies.
Learning how to trade viably requires you to learn and master a few Forex Trading systems. The key to trading is becoming a master of a few trading strategies not the jack of all. Forex Trading systems are important as they can provide structure, some rules and a want to follow. This article will discuss some of the different types of Forex Trading strategies that are currently in the forex market and educate you on how to identify what makes the best Foreign exchange trading system.
Indicator Driven Trading Systems.
Approach with warning, indicator driven Genesis11 strategies are often designed by someone who realises that this set up is currently working right now. The problem is just that, it’s earning a living for that present moment and often very little analysis has been done to understand the longevity of this Forex Trading system.
The biggest issue with Indicator based Forex Trading systems is that it uses indicators to generate a trading signal as opposed to pure price action. Indicators are lagging and therefore tend to give less well off and late signals than pure price action which is most up to date information on the chart.
However, as this trading system often looks exciting and ‘sexy’ on the graphs many amateur traders find this trading strategy far too tempting.
Some guru’s latest flash in the skillet trading strategy.
A trading system which comes with the guaranteed promise you will ‘never lose again and will turn your pc into an automated cash machine’; unfortunately the world is filled with these so called ‘guru’s’ and their millionaire making Forex Trading systems. Experienced traders know that losing trades is the main game, you will will have losers and winner’s you must anticipate to take seems to lose. Professional traders understand no Forex Trading strategy is ever guaranteed, however with trading results and back tested performance figures they focus on the overall picture of success. The best way to avoid falling victim to these scams when finding a Forex training company is to have evidence of their strategies live trading results. This way you will understand the realistic and honest performance of their strategies.
Trading systems that basically work…
Harmonic trading patterns.
Harmonic trading is the art of recognizing particular price patterns consistent with Fibonacci extensions and retracements to calculate turning points in the financial markets. Confused yet? Harmonic trading is complex and requires a lot of time and practice to perfect, yet it could be one of the best trading systems because it offers high reward versus risk ratios and it is very versatile. It can be traded in on any market on any time schedule.
If you are just beginning learning how to trade the market your initial focus should not be on harmonic trading patterns as they will take a lot of time and focus to understand. Except for more capable traders buying a new trading system to add under their belt, harmonic trading is worth a look.
Old school technical analysis trading strategies.
This particular trading system is well known and well traded in throughout the Forex community for many years. Technical analysis includes; ascending triangles, loan consolidation outbreaks plus head & shoulder muscles patterns, flag patterns to mention a few. The advantage in learning these trading systems is that they do work and they have decades of data to prove it.
The downside to these systems is many newer traders find this method to trading dull and perceive it as old fashioned. It lacks the glamor and excitement of indicator driven system. It’s not busy and flashy and unfortunately, newbie traders often mistake intricacy as a sign of better performance and higher probability. However the reason old school technical analysis is still around happens because it works, and plenty of experienced profitable traders use it in their own trading style. Other than lacking the excitement, old school technical analysis trading systems tends to have a lower success rate, which a lot of people are not willing or not capable to deal with. A lesser success rate does mean the winning trades are typically very big, which are the machine profitable and worth learning as it gives you a solid foundation in learning the Forex markets.
Price action trading strategies.
Now what you have been waiting for, I reveal the best Forex Trading system you can learn is price action. Price action trading is the reading of the raw price action on a chart. The price is the most up to date information on the chart, so it will give you the most current situation when reading the chart. Price action as a Forex Trading system is an incredibly simple method that is effective and functional as it works in both trending and ranging markets, with and contrary to the trend. Learning price action can easily simplify your Forex Trading and dramatically improve your results. With price action a investor has the advantage to trade any market on any time schedule, as price action setups are competent in all market conditions.
Price action trading systems to learn:
- Pin Bar Setup.
The pin bar price action Forex Trading strategy is a change system. It is designed to trade tops and bottoms of markets and can also be used in trend continuation by buying dips in upward trends, and selling peaks in downtrends.
- Inside Bar Setup
Inside bars can be used very effectively when trading Forex. They are primarily used when trading strong trending markets as a trend continuation strategy.
- Engulfing Bar Setup
Engulfing bars are perfect for trend reversals. They are rare, but a very strong price action change signal. Can be used when trading trends, but typically purchased at end of trend reversals.
- Fakey Setup
The fakey setup is a trend based trading approach that watches for a false breakout of an inside bar formation. This setup can usually be purchased at numbers of support and resistance, much like the pin bar setup. Fakey’s are used to buy dips in upward trend, and sell peaks in downtrend.
Price Action Trading Systems… Your first step.
Do not get overwhelmed focus on a few price action trading strategies only. Trade these setups on a few different currency twos. Grow your confidence. Become comfortable with identifying setups and really discover how to enter the trade step by step. Start with one price action Forex Trading system and only when you are completely comfortable add another trading system.
It’s fair to say that if you stick to similar to price action trading or old school technical analysis you can’t go far wrong. Be informed about all those different indicator systems out there in the discussion boards, and make sure that you get your Forex Trading education from a company with live trading results, and experienced traders.
One of the biggest challenges inexperienced traders create is dicing and changing between different trading strategies. Choose a Forex Trading system and strategy that matches your personality. It might take a couple of attempts, but once you find one which you like and can become consistent trading it, stick with it.