Like most actions in our life, trading currency requires us to adopt a certain strategy or method which can either bring us profit or make us end up losing our money in speculation. Forex trading system or strategy is the greatest tool for professional traders who adopt their individual strategy on a regular basis as they would like to traverse this fascinating and multifaceted market. It does not necessarily mean that all traders do have their strategies; rather the fact is mostly attributed to those who seem to take professional approaches to go a long way in the currency market.
Those Forex professionals tend to adopt a particular trading system because it dictates them about the suitable time to buy and sell a particular currency pair. Initially, a professional trader sets his or her goal prior to working with any specific trading system. Most traders who adopt a specific strategy tend to pursue two goals with utmost passion and integrity while attempting to develop their forex trading accounts
– Their trading system needs to have the ability to identify major trends of currency pairs within shortest possible time.
– Their system should prevent them from following false signals when going for Buy and Sell currency pairs. False signals are also known as whipsaws.
Contradiction between these two goals is the only and most complicated fact of the above mentioned goals. So besides having a good forex broker, it is necessary that professional Forex traders develop certain trading strategies in view of the mentioned goals. Make sure that traders should not pursue anyone of those goals since both of them are equally necessary to come out successful. Only identification of trade signals quickly will probably lead traders to get affected by faked-outs or whipsaws. On the contrary, only indication for false signals will lead traders to be too late to avail the opportunities of many profitable trades. To come out successful in developing a successive trading system, professional traders have to ensure both of the goals.
Next, how a trader sets up his or her trading strategy is the most crucial part of his or her money making venture. Traders have to choose a specific timeframe when setting up their system. They need to determine their kind.
– Are they day traders or swing traders?
– Do they feel looking at Forex charts on daily/weekly/monthly/annual basis?
Professional traders should find indicators that will guide them to recognize a new and particular trend in order to understand whether a particular signal dictates them to buy or sell. Traders use moving averages as one of the most renowned and accurate indicators to identify market trends. “Moving Average Convergence Divergence” or MACD can be cited as a good example of a specific indicator that takes moving averages to spot trade signals.
Then, traders need to define their risk. It means that they have to specify or determine how much loss they can stand with on each currency trade. Although defining risk is always crucial for traders, it shows the amount of breathing space for each trade. On an average, professional traders define their risk exposure on each trade within 1-3%, and it never exceeds 3%.