A Forex Trading System:
When you hear about Forex Systems, you are usually talking about a robot, but that is not the only type of trading system.
There are 3 critical parts to a trading system:
First, there is the obvious part: an entry strategy.
Every system needs to have a plan for how to enter the market. In the system, it should be defined exactly how, when and why you will enter the market.
When it comes to an entry, a system must describe exactly what it is using to enter the market. The system should define what type of movement in the market is necessary for an entry. It should say if there is a specific patter or formation or moving average cross or support and resistance bounce or whatever criteria you are using to enter the trade. Whatever it is, the trading system should make it very clear so that there is no guessing when it comes time to get in the market.
Second, the system needs to include a risk management strategy.
What kind of risk does the system use? Standard amount of pips, dollar amount or a percentage.
A system must clarify the risk on a given trade. Everything should be spelled out in the system plan.
Understanding the type of risk you want to use is absolutely critical because if you are unable to manage risk properly, it is only a matter of time before your account crashes. The trading system needs to be exact in how it manages risk and should spell out if there are any times when the risk is changed or adjusted.
The last thing a system needs is trade management strategy which is a critical element in your system.
This means that you need to know how to handle the trade before you take an entry. In a trade management strategy, you should have written out exactly how you will control the trade after it is entered into the market so you know what to do when things come up. Conquering trade management is very important for success in trading. This part of the system should include details about how you will respond to all kinds of conditions one you enter the trade.
Those 3 things are the foundation for a good trading system. If you have those in place, you will be able to build upon them and become a successful trader.
Winners Edge Trading has many great tools for traders. The most important is our guide lines on how to create a Forex Trading System
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