Building effective trading strategies and profitable systems is the holy grail of forex trading. Approaching this task which many consider one of the most difficult things one can do in the world is possible if the proper approach and mindset it taken on prior to planning out your methods.

The use of leverage and margin are two aspects of the system that require a lot of attention. While using a high amount of leverage can help produce very high returns at the same time using such high leverage can also cause a margin call very quickly.

When developing forex trading strategies one of the first factors you need to determine is what time frame you want to trade. The amount of time you are willing and able to spend in front of the charts trading will ultimately determine what time frame you create your system around.

Choosing what currency pairs or pair to trade is important as each act with their own behavior and characteristics. Some pairs are active trading in large daily ranges while others are more consistent trading in tighter trading ranges.

For best results when creating your strategy use different indicators and price patterns to narrow down what works best for your trading style. Using price action along with indicators tends to produce the best results for all trading systems.

Often the most overlooked aspect of a trading system is money management. Only using favorable risk to reward ratios along with good money management is essential to the success of a method.

Once your system is complete it is important to test the method under a demo. It is recommended to test the system for anywhere from four to six months in a simulation mode in order to see the effectiveness of the system in all market conditions.

When creating a forex trading system it is so important to consider the risks vs the rewards of the method. It is vital to plan how you can have good consistent returns while at the same time always be primarily concerned with risk never placing your account at risk of losing too much value at any given time where it will take too long to recover from.
 


09/18/2013 23:21

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