Buying vs Creating Your Own Forex Trading System

Understanding Forex Trading Systems

First and most importantly, if you haven’t yet reached the point where you can create your own Forex trading system it is highly likely you won’t understand the system you are buying. The problem is that most systems work only under certain market conditions and if you don’t understand the reasoning behind the system, you will probably end up losing a lot of money simply because you don’t know where you are going wrong.

Secondly, the downfall of most traders is the inability to follow the exact rules of a Forex trading system. This lack of discipline leads to substantial losses because you will have moments when you ignore the system because you are sure the system is wrong and you are missing a lot of potentially profitable trades.

Thirdly, not all systems are created equally which leads to the obvious question of why is the owner or developer of the Forex trading system selling it if it is so effective. After all, the Forex market is a zero sum market, meaning that for every gain, someone else incurs a loss.

Last, but definitely not least, you are better off keeping your money to fund your trading account and developing your own system. This is because the process of developing a Forex trading system will force you to analyze the markets and learn even more about how they move.

Establishing Goals

Yes, we know that your goal is to make money and lots of it. However, this is not a reasonable goal for your Forex trading system. What you want your Forex trading system to do is help you predict trend continuation and reversal as soon as possible so that you can profit from these movements. You also want your system to help you avoid fake breakouts and trend reversals.

Overall, your ultimate goal for your Forex trading system is that you make a profit overall. Don’t give up on your system if you aren’t right 100% of the time because that is practically impossible. In fact, if anyone claims to have a system that is completely infallible you can be sure that they are being less than truthful.

There are too many variables involved in the market to make it fully predictable. After all, if it were so easy to forecast movements then everyone would be sitting at home trading, making a fortune every day.

Creating a System

While coming up with a system can take as little as hour, testing its effectiveness is a lengthy process which will require that you are extremely patient. However, first you have to come up with your Forex trading system.

The first thing you need to do is decide on which time frame you want to trade. Even though you will be looking at more than one time frame, you need to establish which one you will be using to make your entries and exits. So, for example, if you are a day trader then you might use 5 minute or 15 minute time frames and use those chart to identify your entry and exit point.

Next you need to decide on which indicators you will be using to identify new trends as well as indicators that will help you confirm that trend. There are plenty of indicators you can use, but don’t go overboard using too many indicators in an attempt to minimize risk. The Forex market is the very definition of risk and there is no way to completely eliminate it.

You also need to establish how much you are willing to risk by defining exactly how much you are willing to lose. Then you will have to define your entry and exit points. If you are more aggressive, for example, you can enter as soon as your indicators are in agreement. On the other hand, if you prefer to be certain then you can wait for the current candle to close to verify whether your indicators are still showing the same thing.

Creating a Forex trading system is not as difficult as it might sound but it does take some patience to test it. A good system will generate profits for you, even if you don’t win every trade.

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