Find A Money Making Forex Trading System That Works And Suits You

Find A Money Making Forex Trading System That Works And Suits You

Find a​ Money Making Forex Trading System That Works And Suits You
In Forex Trading,​ there are two main approaches – Fundamental Analysis and Technical Analysis .​
Fundamental analysts will concentrate on​ the​ underlying causes of​ price movements,​ whereas as​ technical chartist studies the​ actual price movement.
Fundamental analyst focus on​ various macroeconomic indicators - Interest Rate,​ Trade Balances,​ Growth Rates,​ and Unemployment rates,​ Gross Domestic Product (GDP),​ Inflation and etc .​
For beginners,​ do take note that there is​ no single set of​ rule to​ trade Forex using fundamental analysis .​
There are many theories on​ how a​ currency should be valued.
Technical analyst used historical price data to​ forecast the​ direction of​ future price movement .​
Technical analysis work on​ the​ premise that all current market information is​ already reflected in​ the​ price and that studying price action alone is​ more than necessary to​ trade the​ market.
Some popular methods of​ technical analysis include,​ Chart Pattern,​ Japanese Candlestick Pattern,​ Trend line,​ Support and Resistance Line,​ Pivot points,​ Fibonacci Retracement and Elliott wave theory .​
Technical Indicators which utilize mathematical or​ quantitative tools are Moving Averages,​ Bollinger Band,​ Average True Range,​ Stochastic Oscillators,​ Fibonacci Retracement,​ Commodity Channel Index,​ Convergence and Divergence of​ Moving Averages (MACD) and Relative Strength Index (RSI).
After understanding these two widely known methods of​ analysis available,​ you could be more or​ less able to​ tell which methodology suits you most .​
If you are very financial incline type of​ person,​ fundamental analysis may be your forte.
In Forex trading,​ traders tend to​ rely more on​ technical analysis to​ make informed decision on​ future price movement.
Most seasoned trader after years of​ trading tend to​ develop their own trading system or​ methodology .​
The system could be a​ combination of​ certain technical indicators which they are very comfortable with .​
It is​ only when a​ trader is​ very comfortable with his system that he will trade it​ wholeheartedly and confidently.
For others,​ they may decide to​ trade someone else’s system.
Regardless of​ whatever approaches you use – be it​ fundamental analysis or​ technical analysis,​ the​ system or​ method must be profitable and nothing else matter.
For many traders,​ they think that the​ best way to​ find out whether a​ system or​ method is​ profitable is​ through back testing .​
However,​ back testing has its disadvantage is​ that it​ can never fully duplicate live market conditions .​
What is​ obvious setup may not be so obvious in​ real time.
A better alternative is​ by forward testing trading your system in​ real-time with a​ demo account .​
Forward testing will give you a​ better and clearer understanding of​ what your system is​ capable of .​
In Forex trading,​ live demo account is​ so widely and easily available and trades just like a​ real account .​
It is​ an​ excellent way to​ evaluate the​ profitability of​ a​ system.
For a​ system to​ be profitable,​ we​ also need to​ know about expectancy and opportunity.
Basically,​ expectancy will tell a​ trader what you can expect to​ make (win or​ lose) for every dollar risked .​
The expectancy formula is​ as​ follows:
Expectancy = (Probability of​ winning × average win) – (Probability of​ losing × average loss).
It will produce a​ figure which is​ the​ average amount you can expect to​ profit per trade .​
If the​ expectancy is​ negative,​ it​ means that the​ system or​ method can’t generate profit .​
And obviously,​ the​ higher the​ expectancy is​ the​ better.
After expectancy,​ we​ will have to​ look at​ the​ opportunity factor .​
Opportunity simply means the​ number of​ opportunity you are able to​ trade with your system or​ method .​
By multiplying expectancy with opportunity,​ a​ trader will know how much you can make with your system or​ method over a​ period of​ time .​
For obvious reason,​ if​ the​ system’s expectancy is​ positive and offers plentiful of​ trading opportunities,​ it​ will means more profit.
Now,​ we​ have come to​ the​ most important aspect of​ Trading – Money Management .​
90% of​ traders failed in​ Forex Trading mainly because of​ they don’t understand the​ important of​ money management .​
Money management will inform you how much you should risk per trade .​
The main focus of​ money management is​ the​ preservation of​ trading capital to​ ensure your survival over the​ long term .​
The most common method of​ money management is​ the​ percent risk model .​
It will tell a​ trader not to​ risk more than how many percent of​ your trading account balance on​ any one trade .​
Generally,​ a​ range of​ between 1-3% is​ acceptable percentage to​ use in​ order to​ make money in​ the​ long term .​
Just imagine if​ a​ trader has a​ risk exposure of​ 20% per trade,​ few straight losses in​ a​ row will wipe out the​ entire account.
After reading the​ above factors,​ you will be more or​ less able to​ know which approaches suits you.

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