Building your own forex trading systems is much simpler than most forex traders think and here we will look at how to build one that you can easily understand and apply for profits.
Building your own system is essential to your trading success and all the great traders do it and so must you - success comes from within not from someone else and as most of the systems sold are junk anyway, its time to take responsibility for your trading success.
The first think you need to decide when devising your trading system is what type of trader are you?
Are you a patient trader or do you like more action?
If you are a patient trader long term trend following will suit you.
If you have a more impatient nature then go for swing trading (under no circumstances try day trading it simply doesn't work) once you have decided the type of system that suits you need to build it.
1. Support Resistance and Breakouts
Most forex trading systems use support and resistance with the aim of selling into resistance and buying into support.
A lot of systems don't buy breakouts but it's the safest and most profitable form of trading. Keep in mind that most big trends start From New Market HIGHS NOT market lows so you must go with the breaks when they come to catch the biggest moves.
So learn to do both buy breaks and sell into support and resistance and for this to be successful you must do the following.
2. Use Momentum
Most trading systems fail because they simply try and predict where prices are going to go next.
A trader will buy into support and simply hope it holds - but if you hope in any money making venture you're asking for trouble and forex trading is no different.
You need to wait for CONFIRMATION before executing ANY Trading signal.
If you have a break of resistance make sure price momentum supports it, if you are selling into resistance make sure price momentum has turned down.
If you are unfamiliar with price momentum now's the time to lean (check our other articles) and read up on these great indicators:
Relative Strength Index, Stochastic, Average Directional Movement.
If you always wait for price momentum to be on your side, your trading system will be trading the odds and will give you long term currency trading success.
3. Running Profits and Cutting Losses
Getting a method together is relatively simple and one based upon support and resistance with a few timing indicators is robust and will work - but the hard part is money management and battling the big problem that all traders face:
Dealing with volatility
Many Forex trading systems are right about market direction but get stopped out by volatility.
In many instances this is because traders have stops within the market noise of the trade, or trail it too quickly.
When deciding on money management make sure that you do not try and restrict risk so much you create it - this means:
- Risk reasonable amounts per trade - Do not trail stops to close - Study the volatility of the currency and make sure that stops reflect this.
It's a proven fact that simple forex trading systems work better than complicated ones as their more robust than complicated ones, with fewer elements to break.
Furthermore, if you build your own system you will understand it and have the confidence to apply it with discipline, for ultimate currency trading success.
Finally, the difference between winners and losers is not so much the method they use but how they deal with profits and loses. If you take meaningful risks at the right time and take into account volatility, you can pile up huge forex gains.
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