Forex Trading System Needs to be Chosen By Taking into Many Consideration
The market is
flooded with many online Forex trading systems that offer
extraordinary profits. However, while examining the track record
carefully on the best Forex trading systems, you will see this
warning: "CFTC RULE 4.41 - Hypothetical or simulated performance
results have certain limitations. Unlike an actual performance
record, simulated results do not represent actual trading. Also,
since the trades have not been executed, the results may have
under-or-over compensated for the impact, if any, of certain market
factors, such as lack of liquidity. Simulated program trading in
general are also subject to the fact that they are designed with the
benefit of hindsight. No representation is being made that any
account will or is likely to achieve profit or losses similar to
those shown".
If such is the
warning inscribed on the trading system, a second thought must be
given while buying that particular system. While checking the track
record which may appear good for over two or three years, you need to
check the worst peak to valley draw down. It means you need to adopt
the system at the worst possible time, look at the decline in equity
and check for yourself if you can live with that and the time it
takes to make a new peak in equity. The selection needs to be made
with a preparation that worst draw down is ahead and that you are
ready to stick with the system even through these periods of losses.
A trader needs
to avoid the temptation to buy a black box currency trading system.
It is a trading software package where the logic upon which the
software calculates the trades is not revealed. Unless and until you
know the logic, no successful system can give the traders confidence.
And, if one does not have confidence in the system, executing trading
signals through periods of losses is difficult. Hence, it is better
to buy a Forex trading system that has its logic explained to the
trader so that the trader knows how and why it works.
While going for
any forex agent system, it is always desirable to know
something about the vendor. It is good to ask as many questions as a
trader as it gives an idea how much support a trader will get in
advance of buying the program.
A totally
mechanical Forex trading system which has a real time track record
costs more than any other system. Also, a trader needs to be very
careful in buying the huge amount of automatic trading software for
sale with a simulated track record as these systems have never been
proven to work.
Simplicity is
indeed the thumb rule. So, it is better to choose simple trading
systems as they are more robust and dependable. If you choose a more
complicated system, you are likely to fall victim of curve fitting.
As all the systems are based around support and resistance, it is
important to define this in a system that you want to choose.
No matter what
system you choose, you need to make sure that each and every move is
based upon price momentum. A trader needs to use momentum indicators
to prove whether momentum is accelerating or declining, at an
important resistance or support point to get the odds on trader's
side. There are many to choose from but good ones are – the
stochastic and the Relative Strength Index (RSI).