Wednesday, January 19, 2011

Why Profitable Traders Use a Forex Trading System

The most essential factor to becoming a profitable trader is having a forex system in place to follow. To have a chance at becoming a successful forex trader you must first spend your time working out a detailed strategy before trading live money.
It has been proven by a well known university that people who write done their goals are able to achieve them at a higher rate than those that don't. Writing down a forex trading plan will increase your likely hood of achieve better results.
A forex trading system helps you in advance know how to react in all market conditions. It is important always to be enforcing good behaviors in yourself, for example if you entered a trade on accident that is outside your rules then you need to exit that trade right away.
When a trader tries to make back lost money quickly it is called revenge trading. When a trader tries to make back lost money quickly trading outside the strategy in place even larger losses can happen very rapidly.
The most common mistake beginners traders make is putting a few guidelines in place and then starting to trade a live account. Saying I will not risk more than 1.5% on any given trade is not a trading plan but rather a simple thought.
All forex strategies must be complete including all important building blocks of a trading system which include money management, risk management, trade analysis and price action for entry. Leaving out any one aspect of a trading system will only lead to system failure at one point or another.
The worst thing you can do when creating a forex trading plan is spend your time backtesting past data trying to create an auto trade system. Once you forward test a system that was curve fitted it will fail going forward. Instead spend your time understanding price behavior and market fundamentals.
The difference from traders who make money trading in the markets and those who desire to is that profitable traders have a planned out detailed trading system they stick to and those who wanna be traders play with their calculators figuring out how much money they could make if they have some silly unreasonable monthly return. First learn to have a return on your money before dreaming about how much money you could make. Begin with a well defined system to follow and take your time building a proper foundation.

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